How to Get the Most Tax Mileage from Your Company Car

by: Alan S. Zipp, Esq., CPA

You may use a car for business whether you are a sole proprietor, company owner, or even an employee. If you are a business owner, the same may be true for your key executives, salespeople, and perhaps other employees.

Driving for business can be very expensive, especially now that gas prices are up. Savvy use of the Tax Code can hold down those costs.

Roll Your Own

One approach is to have all your employees use their own cars for business. Your company can reimburse them for business use.

Caution: Commuting to and from work is not considered "business use" ... therefore, no reimbursement is permitted.

How to do it: Each employee should report business use of his/her personal car. Then the company can provide reimbursement.

Rates: Call our office for the standard rate for the current period because these rates are subject to change by the Internal Revenue Service at any time.

Under IRS rules, an employee who receives such a fixed mileage reimbursement for the business use of a personal automobile, up to the IRS standard mileage rate,  is not required to report income from the reimbursement.

Required: A formal "accountable plan." Each employee must submit reports to the company that include the time, place, and business purpose of the travel.

With such a plan, there will be no withholding or W-2 reporting.

Trap: If reimbursements exceed the IRS standard mileage rate, the excess must be included on the W-2 as additional gross income. Call our office, and we will help you establish the accountable plan.