Employer reimburses auto expenses with both a fixed dollar amount per month, and a mileage rate. The total dollar amount of the two, vs the miles driven, does not exceed the Federal standard mileage amount.
Is the difference an allowable deduction via Form 2106 & Schedule A ?
Something is deductible on the 2106 feeding Schedule A, but we can't tell from the information provided. The flat amount definitely should be added to the employee's wages. The mileage rate sounds like it could be an excludable accountable reimbursement plan. The deductible amount is total expenses (actual or standard rate) minus reimbursement not included in income.
Phil Marti VITA/TCE Volunteer Clarksburg, MD
Thank you. After re-reading Form 2106 several times, it does appear that it is "total dollars" of reimbursement, that is then compared to the Federal rate, that determines if there is a deduction (or taxable income). IOW, a flat amount can be combined with a mileage rate as long as the flat amount is not also included in wages.
I strongly suspect that the "flat amount" should have been included as compensation in the employee's W-2, and thereby subjected to withholding taxes. It's quite possible, however, that the "per documented mile" amount would *not* be included in the employee's taxable compensation.
If this is [if these are] the case, then the two "reimbursements" should not be treated the same on the employee's Form 1040.
Needs more study, more facts.
There is a revenue procedure that outlines how an employer may reimburse an employee under an accountable plan such that no amount is added to wages. The employer can pay actual costs, use a mileage rate or used a fixed and variable rate. The method identified in the post is allowed and would not generate any w-2 wages as long as it is less than the published standard business miles rate. If it is less, the employee is free to take a deduction to make up the difference. Here is an excerpt from the revenue procedure in my files:
A mileage allowance is paid at a flat rate or stated schedule if it is paid on a uniform and objective basis for the expenses described in section 4.03 of this revenue procedure. The allowance may be paid periodically at a fixed rate, at a cents-per-mile rate, at a variable rate based on a stated schedule, at a rate that combines any of these rates, or on any other basis that is consistently applied and accords with reasonable business practice. Thus, for example, a periodic payment at a fixed rate to cover the fixed costs (including depreciation or lease payments, insurance, registration and license fees, and personal property taxes) of driving an automobile in performing services as an employee of the employer, coupled with a periodic payment at a cents-per-mile rate to cover the variable costs (including gasoline and all taxes thereon, oil, tires, and routine maintenance and repairs) of using an automobile for those purposes, is an allowance paid at a flat rate or stated schedule.
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