The IRS sets mileage rates for employees who operate their own personal vehicles at work (they also set rates for charitable, medical, and moving purposes).
What sometimes confuses people about this is that the IRS sets a mileage rate, but does not mandate reimbursement by the employer. Many employers think they have to reimburse mileage but, in reality, they don’t. Employers are free to reimburse more or less than the IRS rate .
The IRS rate is a guideline for employers and a tax deduction opportunity for employees.
IRS Standard Mileage Rate for 2015
The standard mileage rate increased this year by 1.5 cents. The new IRS rate is 57.5 cents per mile.
A company can reimburse its employees whatever it wants – from zero cents per mile to over the IRS maximum. There is no law mandating how much or how little to reimburse employees.
Even if you don’t reimburse your employees, they can recover the costs on their taxes. Whatever amount an employer does not reimburse, employees can deduct on their taxes. If employers reimburse more, however, which is perfectly acceptable, employees have to claim this mileage excess as wages on their taxes
Even still, employees don’t usually appreciate it when their employer doesn’t reimburse them on every paycheck. Gas costs and repairs are out of pocket expenses and getting paid back for those expenses only once a year (at tax time) may put a lot of employees in a tough spot.
While businesses can reimburse employees any rate of their own choosing, a BLR Survey found that 73% of respondents (144 in total) actually reimbursed employees the max IRS rate. What you do is your own choice. I’ve tried to help break down the pros and cons in this post .
Use Expense Sheets to Calculate Mileage Payments
Reimbursing mileage with expense software like Timesheets.com allows employers to use whatever rate they like. The administrator sets the rate, employees enter their miles, and the software calculates the total. At the end of the year, employees can run reports on paid expenses to calculate their expected tax deductions.
How to Obtain the Miles
Once you’ve got the miles, enter the value into your expense sheet and the system will calculate the reimbursement amount. You can pay this amount on the next pay day.