Mileage reimbursed

[Gretel]

Another mileage questions. Sigh!!

Oil field worker gets reimbursed from employer for miles driven to temp job for every trip about 10 cents less than SMR. However, calculating the allowed mileage SMR I have to take into account that expenses for home trips in between are allowed only up to the amount T/P would have incurred had he stayed at job site.

Last year allowed expenses were higher than reimbursed, no problem. This year reimbursed expenses are higher.

I have a notion that employer can reimburse for all trips including home trips with no tax consequences to T/P even though a deduction for 2106 would not be allowed. Is that right?

[RitaB]

If I understand correctly,

the employer's reimbursements exceeded the employee's deductible expenses. The difference is income to the employee. Excess reimbursement should go to 1040, line 7. My software does this automatically when the reimbursements on 2106 exceed the allowable expenses.

This is similar to excess housing allowance with clergy, if that helps.

[Gretel]

Thanks, but I am not convinced yet. Yes, it is carried over to line 7 on the 1040. But now I really start to think...

Let's assume this employee never wanted to claim additional out of town expenses. The employer reimbursed him below the allowed SMR (employee has no reason to believe he got too much) and only because of the rules for home trips in between did the reimbursements exceed the amount allowed on the tax return.

Does this mean we have to ask all our out of town workers who get reimbursed, for their detailed records to make sure that we don't have a situation like this, and then, slap them in the face with additional fees and taxes?? Grumble, grumble, I don't like this.

[RitaB]

Well, yes I think it does

[QUOTE=Gretel;77402Does this mean we have to ask all our out of town workers who get reimbursed, for their detailed records to make sure that we don't have a situation like this, and then, slap them in the face with additional fees and taxes?? Grumble, grumble, I don't like this.[/QUOTE]


There's a reason your software sends the excess reimbursement to line 7.

Yeah, it's a PITA for us, and hard to explain to client, but an excess reimbursement is income. He could give it back, or pay the tax on it. Think about it, if he didn't have to pay tax on excess reimbursements, somebody would have figured out by now that everybody should just tell their employer to cut their pay and bring on the reimbursements. (Wink, wink.)

To use the pastor example again, (don't know why I keep doing that), if the church pays his tax for him, it's the equivalent of paying him that money, and it's income to him. If he does not spend the amount designated for housing allowance, the excess is income.

Same as when somebody's credit card debt is cancelled. They got free stuff. The rest of us use our after-tax income to get stuff.

One silver lining, your client is not paying SS/MC tax on this income, just FIT.