Most may think of travel expenses as flights and hotels, but overlook another key aspect – driving. Employees may use a personal vehicle for business-related travel. It is your job as the employer to determine the policies to go about reimbursing them, if you choose to do so.
Mileage Rates For Reimbursement
The United States recently released their IRS Mileage Rates for 2017:
- 53.5 cents per mile for business miles driven. This is down from 54 cents/mile in 2016.
- 17 cents per mile driven for medical or moving purposes. This is down from 19 cents in 2016.
- 14 cents per mile driven in service or charitable organizations.
Although the 2017 rates have not been released, the 2016 automobile allowance rates for Canada were:
- 54¢ per kilometre for the first 5,000 kilometres driven
- 48¢ per kilometre driven after that
Employees Options For Travel Expenses
Employees should have two options for keeping up with their mileage:
- Utilize the standard mileage rates listed above
- Track actual expenses
Tracking the standard mileage rate may be easier, but know that it should entail tracking the number of miles, the total miles driven, the dates of trips, business destinations, and the purpose of the trip.
Tracking actual expenses may result in a larger tax deduction, but requires significantly more meticulous record-keeping. As long as the vehicle is used strictly for business purposes, everything from oil changes to insurance to depreciation can be considered.
Do You Reimburse Mileage For Your Employees?
If an employee uses a personal vehicle in a work-related context, you are not required to reimburse them. However, many other businesses choose to do so. After all, they are putting wear and tear on their car and using gas, which can both easily be classified as travel expenses.
If you do choose to reimburse your employees, you do not have to use the standard mileage rate. Assuming your employee files an expense report they should be able to consider the reimbursement as a business deduction, and not income. If you choose to pay your employee a pre-determined lump sum that does not require an expense report, the employee would have to report this as wages, as opposed to a reimbursement for travel.
No matter what you choose, you should have a clear-cut policy regarding travel expenses that should be thoroughly explained to your employees, and can be easily accessed in an employee handbook. Your expectations for what is to be submitted on an expense report should be made clear to avoid confusion at a later point in time.