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Tag: reimbursement

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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Deciding on a Mileage Reimbursement Rate for Your Company

More money, less money

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.
  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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If Employers Don’t Reimburse, Employees Can Claim Mileage Deduction

Mileage reimbursement is not mandatory in the US (in most cases), however, the IRS issues a yearly Standard Mileage Rate for use by employees and employers in the following ways:

  1. The rate gives employees a rate to use when they claim mileage deduction at tax time.
  2. It gives employers a reasonable reimbursement rate based on current research.
  3. The rate informs employers of the amount employees kickback for minimum wage considerations.

The rate gives employees a chance to get compensated either through payment by the employer or as a deduction for business related mileage on their taxes. If you need to calculate employee mileage reimbursement, try our free calculator to figure out the cost.

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