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Tag: reimbursement

Paying Employees for Both Travel Time and Mileage Reimbursements?

Although millions of people have recently joined the remote workforce, many employees still travel to work daily. Some workers travel more than others, though. Many employees, such as home care providers and construction workers, must travel for work. They often commute from work site to work site throughout their shifts. Employees who travel for work purposes may be eligible to earn travel time and mileage reimbursements.

Do you have to pay your employees both travel time and mileage reimbursements?

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The New Mileage Rate for 2021

If you’re an employer in the United States, it’s likely that you pay your employees mileage reimbursement when they’re traveling for work purposes. Every year, the  IRS adjusts the mileage reimbursement rate based on examination of variable costs. Based on the latest study, the IRS has changed 2021’s mileage rate to a lower rate than last year. Taxpayers will use this rate to compute their deductible costs associated with using a vehicle.

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New Mileage Rate for 2020

Editor’s Note: To view the mileage rate information for 2021, please go here.

If you’re an employee or employer, you’re probably aware that a lot of things change in the beginning of each year. This year, for instance, we’ve already seen changes to the US overtime policy new salary history bans in Ohio, New York, and New Jersey, and changes to Form W-4. Of course, to keep us on our toes, the IRS has placed a new regulation upon us. On December 31st, 2019, the IRS released the new standard mileage rate for the year 2020. Their official notice explains the rules of the optional standard mileage rate within the next year. Taxpayers will use this rate when computing deductible costs when using a vehicle for business, charitable, medical, or moving expense purposes. 

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States Which Require Expense Reimbursement Now Include Illinois

In the United States, expense reimbursement is only required in a couple of cases.

1. In the event an employment contract contains expense reimbursement, an employer is responsible for expense payments.

2. When employees pay for business related expenses, they are kicking back money to their employers. These kickbacks must be subtracted from an employee’s wages to accurately calculate minimum wage. If employees are not paid at least minimum wage, free and clear, the employer is in violation of the FLSA.

However, some states have their own laws surrounding expense reimbursement. Those states include: Illinois, California, Massachusetts, Montana, Pennsylvania, New York, Iowa, and the District of Columbia. Illinois was the newest addition this year.

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When Employers Have To Reimburse Employee Expenses and Mileage

have to reimburse employee expenses

While federal law does not require employers to reimburse employee expenses and mileage, some states, such as California, do. Furthermore, federal law does require that employers pay minimum wage. When the cost of the expense causes the employee to drop below the minimum wage, the employer does have to reimburse mileage and expenses.

If you need to reimburse employees for mileage, try our free calculator. It can help you figure out the cost.

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Mileage Reimbursement in California

The federal government does not require that employers reimburse for mileage. When employees pay for work-related expenses, the employer has no obligation to pay them back. (There are exceptions like when expenses cause employees to fall below minimum wage.)

Except, that is, in California. Employers in California must provide their employees with mileage reimbursement.

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Deciding on a Mileage Reimbursement Rate for Your Company

Mileage reimbursement is not mandatory in the US (except in some cases). However, the IRS issues a yearly Standard Mileage Reimbursement Rate as a guideline for the following purposes:

  1. It is the rate employees use if they claim the mileage deduction at tax time. Some taxpayers can still claim mileage deductions, but some cannot. Read more here.
  2. It gives employers a reasonable reimbursement rate based on current research.
  3. The rate is used to figure the minimum wage for employees who kickback money from their own pockets.

We can help if you need to reimburse employees. Try our free mileage calculator to determine your costs.

Some people want to know if they can reimburse less than the standard mileage rate. Others want to know if they can reimburse more. The answer is yes to both.

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