How to Calculate Mileage Reimbursement in California

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Most employers believe that they have to pay their employees for business mileage. But this is not true. The federal government does not require employers to reimburse employees.

There are some exceptions, however, that protect employee interest to ensure they are making more than minimum wage.

The Fair Labor Standards Act, for instance, prevents mileage expenses from causing an employee to fall below minimum wage.

The act states that an employee’s wages must be paid free and clear of impermissible deductions.

Deductions such as mileage costs could reduce the pay below the federal minimum. They include costs such as those of operating a vehicle or traveling for work-related purposes.

In California, state regulations require employers to compensate employees for any expenses incurred while working.

The California Labor Code states:

“An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.”

But Californian employers don’t have to reimburse according to the IRS Mileage rate. They can work out an agreeable rate with their employees, or even reimburse the actual expenses incurred.

If they decide to do it this way, then the employee needs to keep a meticulous record of the mileage and expenses to support any reimbursement claims.

They can do this through the use of a mileage tracking app.

What is the IRS Mileage Rate?

GOFAR Vehicle MileageTracker
Vehicle Mileage Tracker

The IRS Mileage rate offers a reimbursement guideline for people who drive their personal vehicles for work purposes. It also presents them with an opportunity for tax deductions.

According to Notice 2019-02, announced on January 1, 2019, the standard IRS mileage rate for the use of a car is:

  • $0.58 per mile for business
  • $0.20 per mile for medical and moving costs
  • $0.14 per mile for charitable work

The IRS carries out an annual study on the fixed and variable costs of operating an automobile to help determine the standard mileage rates.

Employers can choose whether they want to pay their employees using the IRS Mileage rate or not. Although if not, whatever reimbursement rates they choose must be in line with their state regulations.

Furthermore, according to the FLSA regulations, they must pay their employees the standard minimum wage.

If the mileage expenses leave their employees with a rate below the minimum wage, federal law obligates the employers to help their employees with the costs.

Reimbursable and Non-Reimbursable Expenses

If an employee uses their personal vehicle for work-related purposes, the IRS has a guideline to help them navigate what they may claim.

Here is a guide to the reimbursable and non-reimbursable expenses:

Reimbursable Expenses

  • Parking fees, ferry fees, bridge, road, and tunnel fees, and aircraft or airplane parking, landing, and tie-down fees.
  • When your employees use their vehicles on official business near their home or station.
  • If an employee drives to any temporary job locations, as long as they do not operate directly from their home to the office.
  • When the employee first reports to your offices and then travels to other work sites.
  • If your employee has to travel for training purposes, they may claim reimbursement if the training is within the city limits of their official work station. However, in this case, compensation is subject to review and approval.
  • If the employee stops en route between their home and the workplace for work purposes, they should be reimbursed for driving after the stop.

Non-Reimbursable Expenses

  • Travel between the employee’s home and office or temporary work station.
  • Charges for repairs, depreciation, replacements, oil, towage, gasoline, taxes, and insurance.
  • Parking at an assigned office space when the cost arises during travel between their home and office.
  • Miles that are driven solely for personal reasons.

How to Calculate Mileage Reimbursement

If you use your privately owned vehicle for work purposes, then you may deduct the vehicle expenses from your tax return.

There are three options you can employ when calculating your mileage expenses:

  1. You can keep all your receipts when you pay for services associated with using your car for work purposes. These include gas, oil, parking fees, insurance, lease payments, maintenance, and repairs.
  2. You can multiply the number of miles you’ve driven by the standard IRS mileage rate. This is also applicable if you are driving for medical, charity, or moving purposes.
  3. You can use a mileage tracking app like GOFAR. This application provides reliable mileage tracking and generates automated travel expense reports.

As a taxpayer, you always have the option of calculating the actual costs of using your vehicle rather than using the IRS mileage rates.

To determine the travel distance, use the actual miles driven as indicated on the odometer.

Before you start driving, take note of the odometer reading, and after driving to the new location, record the new figure. The difference between the two readings gives you the number of miles driven.

To compute your mileage reimbursement, multiply the applicable mileage rate by the number of miles driven.

For instance, if you drove 15 miles:

15 miles x $0.58 (IRS mileage rate) = $8.70 due in reimbursement.

Many companies still rely on manual mileage logs where employees have to manually input their mileage into a spreadsheet. This information is then included in their monthly expense reports.

However, this process is rife with mileage inflation and inefficiencies. That is why modern companies are leaning towards solutions like GOFAR.

What Records Do You Need to Calculate Mileage Reimbursement?

Although working out your reimbursement is simple, keeping the records to prove your mileage is not.

Usually, employers require the following information to work out an employee’s mileage reimbursement:

  • Number of miles traveled
  • Date of the drive
  • Place driven to for business
  • Reason for your trip

Without a detailed log report, you risk having your reimbursement claim denied.

Furthermore, some employers may even accuse you of fraud if you don’t have supporting documentation for your mileage claim.

GOFAR is an advanced mileage tracker that offers an accurate expense tracking system. It also comes with a fully automated report generating system for all your travel expenses. This app provides precisely what you need for your log reports and reimbursement claims.

Visit gofar.com to find out how you can incorporate their mileage tracker into your business and enjoy a hassle-free mileage reimbursement.

Track Work Mileage With GOFAR

  • Log, calculate and export business expenses at the press of a button
  • No ongoing fees
  • Available on iOS and Android

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