Image courtesy of Winnond at at Freedigitalphotos.net
Employers in California are required by law to reimburse employees for expenses related to use of a personal vehicle for work-related activities. That includes gasoline, oil, maintenance costs, insurance, licensing and registration, and depreciation of the vehicle – in other words, all the expenses associated with owning and operating a vehicle.
The IRS sets a standard reimbursement rate used by many employers. The California Supreme Court has ruled that the reimbursement rate can be decided by negotiation – nevertheless, it must pay all of an employee’s expenses for using a personal vehicle. The IRS rate, which rose on Jan. 1 to 57.5 cents per mile for business miles driven, is calculated to encompass all such expenses.
On the positive side for employers, reimbursement can be deducted as a business expense.
Commuting to and from work is not considered a reimbursable expense. Reimbursable expenses include:
- Daily bank deposits
- Purchase of supplies
- Required travel between stores
- Required travel to transfer inventory
- Visiting clients
- Attending a business meeting
Title 8 places additional requirements on employers. Employers must:
- Compute and pay the reimbursements at least once a month.
- Make the payments no later than the end of the month following the month in which the expenses were incurred, unless an employee fails to submit a record of miles driven for that reimbursement period. In that case, the employer has to make the payment no later than the month after the month in which the employee submits his or her mileage records.
- Provide an itemized statement in writing at time of payment, explaining how the reimbursement was computed
- Keep daily mileage records and maintain these records for at least three years.
- Not take any deductions from amounts paid to employees as mileage reimbursements.
If you have questions or concerns about laws governing mileage reimbursements (or other employee-related business expenses), contact Johnson Employment Law for guidance at 949-238-8044.