Deducting Auto Mileage for W2 Employee Who Has Received Employer Reimburesements

[ddoshan]

You are getting hung up on a non-issue. It doesn't matter whether they exclude the first 20 or the first 100 miles. It's just their policy. The taxpayer has to base his deduction on the actual, legitimate mileage allowed under the Tax Code. If they reimburse him for any of it, that is deducted. This applies to the mileage reimbursement plan, as described, which apparently is not included on his W-2.

I guess I am taking the position that his mileage may be non deductible employee business expense. Maybe it is legitimate transportation expenses. But if his mileage is indeed the same as commuting which it seems it could be ... then should not any reimbursement from his employer be included in his W-2. Would not his employers reimbursement then be considered from a non accountable plan.

I admit I am confused

[Burke]

I am baffled by this 20 mile thing. And as to why or why not he should get any deduction for his mileage.

You are getting hung up on a non-issue. It doesn't matter whether they exclude the first 20 or the first 100 miles. It's just their policy. The taxpayer has to base his deduction on the actual, legitimate mileage allowed under the Tax Code. If they reimburse him for any of it, that is deducted. This applies to the mileage reimbursement plan, as described, which apparently is not included on his W-2.

[Steve Stang]

Not Reported As Wages By Company

The big problem in this whole thing,

To me the big problem with this whole thing is just what mileage may be deductible. I am still of the opinion that his reimbursements from the Co. most probably should be reported as wages, as the reimbursements may very well not be for allowable deductible employee business expenses.

I am baffled by this 20 mile thing. And as to why or why not he should get any deduction for his mileage.

The company (Acosta) is not reporting this as wages. They require employees to use their own vehicle. They do not provide a flat reimbursement per month regardless of mileage. Their employee manual details that they are trying to cover fixed and variable expenses that an employee incurs. As such the reimbursement rates are tiered and the per mile rate drops as the mileage driven per month increases.

So I would consider this a legitimate expense incurred by the employee.

And in many ways this case seems to resemble the one outlined by Jiggers above. They expect the employee to drive to the customer's store location which means its more time efficient to go direct rather than go to the office and then likely have to backtrack.

In this employee's case, there is one office located 18.3 miles from his home (but I'm not sure if he's in that division). The other regional office is more than 40 miles away.

So as arbitrary as it may be, I can see why the employer has probably indicated that the first and last 20 miles is 'commuter' miles for their record-keeping.

But again, if the employee is incurring use of his vehicle for an average 30 cents per mile and the IRS rate is 56.5 cents then I can see why the employee should consider - at least a portion of this - as unreimbursed requiring a 2106.

[Steve Stang]

2% Threshold

I would define his reporting office as his "tax home", even though he doesn't go there often, and would make a point of treating all trips to this office and back as non-deductible "commuting" miles. Reason being, failure to do so could result in the IRS declaring NO HOME and therefore ZERO deductible mileage.

The company can define whatever they wish as "commuting" miles so long as the taxpayer observes the IRS commuter concept on his 2106. The company just is trying to make a policy of what they wish to reimburse, and they can do whatever they want. So the first 20 miles may or may not be "commuter" miles on the 2106, and the EXCESS of 20 miles may or may not be "commuter" miles on the 2106.

The big problem in this whole thing, which hasn't yet been discussed, is the 2% threshold carving huge amounts out of his deduction for this. I don't see any way to avoid the 2% so long as this guy is an employee.

Even though the Sch A threshold lops off a portion of his mileage expense it still would be worth it as it increases his overall itemized deductions which helps him reduce his taxable income - which was inflated by early distributions from IRAs.

[ddoshan]

The big problem in this whole thing,

To me the big problem with this whole thing is just what mileage may be deductible. I am still of the opinion that his reimbursements from the Co. most probably should be reported as wages, as the reimbursements may very well not be for allowable deductible employee business expenses.

I am baffled by this 20 mile thing. And as to why or why not he should get any deduction for his mileage.

[Nashville]

One Central Location

I would define his reporting office as his "tax home", even though he doesn't go there often, and would make a point of treating all trips to this office and back as non-deductible "commuting" miles. Reason being, failure to do so could result in the IRS declaring NO HOME and therefore ZERO deductible mileage.

The company can define whatever they wish as "commuting" miles so long as the taxpayer observes the IRS commuter concept on his 2106. The company just is trying to make a policy of what they wish to reimburse, and they can do whatever they want. So the first 20 miles may or may not be "commuter" miles on the 2106, and the EXCESS of 20 miles may or may not be "commuter" miles on the 2106.

The big problem in this whole thing, which hasn't yet been discussed, is the 2% threshold carving huge amounts out of his deduction for this. I don't see any way to avoid the 2% so long as this guy is an employee.

[ddoshan]

It seems to me that the only thing he can hang his hat on is .... If you have no regular regular place of work you can only deduct your transportation expenses to temporary work locations outside the taxpayers metropolitan area. No one, as far as I know, has ever definitively defined just what that is. But 20 miles would not seem to be a reasonable distance. The IRS is all over the place on this. Personally for the sake of my sanity, I consider that a client is working temporary jobs
outside his so called met. when working temp. jobs more than 40 miles out. But I think that is even to low.

[Steve Stang]

Temp Work Locations

Okay, here's the thing. TTB 10-5 says that:

Use of a vehicle qualifies as business use under all the following.
• Getting from one workplace to another in the course of a taxpayer’s business or profession when the taxpayer is traveling within the city or general area that is the taxpayer’s tax home.
• Visiting clients or customers.
• Going to a business meeting away from the taxpayer’s regular workplace.
• Getting from home to a temporary workplace when the taxpayer has one or more regular places of work. These temporary workplaces can be either within the area of the taxpayer’s tax home or outside that area.

Notice, however, in the example of that same TTB page, that "the cost of commuting to each temporary job site within the metropolitan area is nondeductible personal expense because Shae does not have a regular place of work."

The fact that the company treats twenty miles each day as commuting establishes pretty clearly that it does NOT consider your client's home to be his primary office (or else there would be NO commuting miles), and the use of a flat twenty miles regardless of origin establishes equally clearly that his primary office is not any particular place. The employer may reimburse anything under an accountable plan -- that's fine -- but any attempt to deduct the non-reimbursed portion of the mileage is likely to be rejected because your client has to regular place of work.

My two cents.

I see that in the TTB but it also says at 10-5:

Temporary work location. Defined as a work location that is
realistically expected to last, and does in fact last, for one year
or less. Commuting from home to a temporary work location is
deductible only if the taxpayer has one or more regular work locations ...

The company has a contract with the grocery store chain (a separate entity) so it would seem that it is likely to last for more than one year. So in this case, my interpretation is that the commuting from home is deductible as any one of these stores could be regular work locations under the contract.

[jsamans]

Because of the territory covered (72 stores, 6 states) he may drive 100 miles or more to one store and work his way back to other stores. I realize that in the strict sense of 'commuting' per IRS and in the TTB that such commuting is not deductible regardless of the distance, that folks who travel long ways to get to work don't get any advantage of deduction. On the other hand, the TTB does say that mileage to a client/customer is deductible from the office or home. In this case, he has no fixed office so I think it right to use the distance from the home.

I'm inclined to use the total reported miles on his log multiply that by the IRS mileage rate and then reduce the amount by the total company reimbursement. Then put that on the 2106 and run it through the Schedule A 2% threshold.

Okay, here's the thing. TTB 10-5 says that:

Use of a vehicle qualifies as business use under all the following.
• Getting from one workplace to another in the course of a taxpayer’s business or profession when the taxpayer is traveling within the city or general area that is the taxpayer’s tax home.
• Visiting clients or customers.
• Going to a business meeting away from the taxpayer’s regular workplace.
• Getting from home to a temporary workplace when the taxpayer has one or more regular places of work. These temporary workplaces can be either within the area of the taxpayer’s tax home or outside that area.

Notice, however, in the example of that same TTB page, that "the cost of commuting to each temporary job site within the metropolitan area is nondeductible personal expense because Shae does not have a regular place of work."

The fact that the company treats twenty miles each day as commuting establishes pretty clearly that it does NOT consider your client's home to be his primary office (or else there would be NO commuting miles), and the use of a flat twenty miles regardless of origin establishes equally clearly that his primary office is not any particular place. The employer may reimburse anything under an accountable plan -- that's fine -- but any attempt to deduct the non-reimbursed portion of the mileage is likely to be rejected because your client has to regular place of work.

My two cents.

[Steve Stang]

I agree that the first 20 miles per day and the last 20 miles per day are not necessarily commuting miles. That's what the employer is calling them. But in reality, his commuting miles could be more or less than that amount on any given day.

My view is that each day, the drive from his home to the first store is commuting, and is not deductible. Same goes for the drive from the last store back to his house. In general, all of the miles in between would be deductible business miles, after accounting for the reimbursement.

Is there something about this scenario that I'm not getting? Does he drive 250 miles or something just to get to the first store??

BMK

Because of the territory covered (72 stores, 6 states) he may drive 100 miles or more to one store and work his way back to other stores. I realize that in the strict sense of 'commuting' per IRS and in the TTB that such commuting is not deductible regardless of the distance, that folks who travel long ways to get to work don't get any advantage of deduction. On the other hand, the TTB does say that mileage to a client/customer is deductible from the office or home. In this case, he has no fixed office so I think it right to use the distance from the home.

I'm inclined to use the total reported miles on his log multiply that by the IRS mileage rate and then reduce the amount by the total company reimbursement. Then put that on the 2106 and run it through the Schedule A 2% threshold.

[Steve Stang]

Point taken but ... Is it an allowable employee business expense in the first place that he is being reimbursed for. Why only after the first 20 miles. Not sure what that would mean. Do they consider the 1st and last 20 miles commuting and then any mileage after that to be a legitimate employee expense. How do they come up with the 20 mile thing. Not sure what criteria or rules that would be based on.

Thanks all.

I've read the employer's manual related to this provided by the employee. The employer has several reimbursement programs. This one does not get added back to W2. The employer is calculating a way to cover the fixed and variable costs associated with driving a Ford Focus used for work regardless of the actual vehicle used by the employee. The plan states that the first 20 miles are considered commuting regardless of how many stops are made along the way.

From the manual:

Mileage Reimbursement Program (how the plan works)
Mileage reimbursement rates are based on the cost of acquiring and operating a “standard” personal vehicle for business purposes. It is based on the annual fixed and variable costs you would incur to own and operate a brand new Ford Focus for business use. This is regardless of what vehicle you actually choose to drive.

Reimbursable Costs used in Calculation of the Reimbursement Rate
Reimbursements under the program are for reimbursable business costs. Fixed costs used in the calculation of the reimbursement rate for the standard vehicle are as follows:
1. Vehicle depreciation
2. Business use auto insurance
3. Taxes
4. License and registration fees

Variable costs used in the calculation of the reimbursement rate are for business costs of the standard car under the program as follow:

4. Gasoline
5. Tires
6. Maintenance


Mileage has to be logged and reported through a corporate system. And the policy clearly indicates that his employee class has no fixed location/office so he has to 'eat' the first and last 20 miles of each day.

[Burke]

Businesses can do anything they want. They can pay any rate they want. It doesn't matter if they routinely only pay over 20 miles. That's just what they decided to do. The taxpayer has to include any excess reimbursement over the IRS rate in income. He also has to deduct any reimbursement if he takes mileage on his tax return, unless they included the entire amount in Box 1 of his W-2. Usually that is done when it is a flat car allowance per month, for instance.

[ddoshan]

I don't think so. He is submitting mileage under an accountable plan. If he wishes to deduct his mileage, he computes the entire amount (less commuting) at the IRS rate, then reduces it by the reimbursement from the company.

Point taken but ... Is it an allowable employee business expense in the first place that he is being reimbursed for. Why only after the first 20 miles. Not sure what that would mean. Do they consider the 1st and last 20 miles commuting and then any mileage after that to be a legitimate employee expense. How do they come up with the 20 mile thing. Not sure what criteria or rules that would be based on.

[Burke]

.
By the way, is the store including this reimbursement in his wages. Seems they should be.

I don't think so. He is submitting mileage under an accountable plan. If he wishes to deduct his mileage, he computes the entire amount (less commuting) at the IRS rate, then reduces it by the reimbursement from the company.

[ddoshan]

I tend to agree with Koss ... Would seem that mileage to his first stop and trip home from last stop would be commuting and not deductible. Mileage from first stop to any other stop would be. What the store is doing is irrelevant in my opinion. They are just helping out some with his expenses.
A lot of people drive 100 plus miles or more every day RT to get back and forth to work. They can't deduct mileage.

Reasoning being that apparently he does not have a regular work location so temporary jobs would seem to be out.
He apparently does not have a qualified office in his home which would probably make all his mileage deductible.
By the way, is the store including this reimbursement in his wages. Seems they should be.
I really don't see how the 1st and last 20 miles each day enters into the equation.