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Tag: reimbursement

Business Math: Calculating Mileage When Using a Personal Vehicle

Calculating mileage reimbursement starts by knowing when you actually need to reimburse your employees. Although many employers think that they have to pay for mileage , the federal Government does not require you to reimburse employees. However, there are certain states that have regulations. California, for instance, requires employers to reimburse employees for any losses incurred while completing work duties

The IRS sets the mileage reimbursement rate for employees who drive their own Privately Owned Vehicles (POV), but this rate is a guideline for employers and a tax deduction opportunity for employees. You can choose whether or not you want to pay your employees more or less than the IRS rate. Also, keep in mind that you have to follow your state’s reimbursement regulations as well. In Addition to that, under FLSA regulation, you must pay your employees the standard minimum wage. If their expenses lead them to an hourly rate below minimum wage, you will have to assist them with the cost.

The IRS has a guideline for reimbursable and non reimbursable expenses when an employee uses their own POV for business duties. Here are some reimbursable and non reimbursable expenses:

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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.

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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.

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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