Understanding Mileage Reimbursement in 2020

Good morning, Ladies and Gentlemen. Welcome to the People Processes podcast, where we dive deep into the tools, laws and yes processes that you need to know in order to scale and grow your organization. My name is Rhamy Alejeal, I'm the CEO of People Processes. We help organizations all across the USA streamline, optimize, implement, and revolutionize their HR operations. We've helped hundreds of companies across the U S ,thousands of HR leaders across the world get their people processes right.Today, we're going to be diving into the Tax-Free Mileage Reimbursement Stuff for 2020. It's a little dry stick with me. It's kind of interesting. We're going to be covering the changes that came up here in 2020, make sure you're all set to go forward. In the meantime though, before we dive to date, please subscribe to the podcast. You can find us on iTunes, Google podcasts, Spotify, Stitcher, any podcatcher you like. You can also subscribe at peopleprocesses.com, which will put you on our email list and send you subscriber only content. I look forward to seeing you on one of those.Now let's talk about this. The IRS has announced that the standard mileage rate for 2020 is 57.5 cents per mile. That's down from 58 cents per mile for 2019. If your company reimburses employees for business use of employees’ own cars, the expenses are deemed substantial in 2020 as long as it does not exceed 57.5 cents per business mile, regardless of the employee's actual cost. I said substantial. It’s substantiated. A reimbursement is free of employment taxes as long as the employee provides your company with a record of the time, place, business purpose, and number of miles traveled. The employee is not required to provide a record of actual expenses or receipts. Instead, they provide you a log and as long as you are paying at 57.5 cents, you're good.However, if you give more than this year, let's say you didn't update your payroll, now you're paying 58 cents. You do not. You have to actually produce a supporting record of actual expenses. The excess under beyond that is treated as a “non-accountable plan" and it actually gets taxed as wages. On the other hand, you're not required to pay the 57.5 cents. If you go the standard route, expenses are deemed substantiated as long as the employee reimbursement rate does not exceed 57.5 so you could do 50, you can do 45, but you can't do more than 57.5 unless you're actually accounting for every penny of the employees. Depreciation on their vehicle mileage, your share of their oil changes, it's a very complex reminder. In the past, the business standard mileage rate could be used by an employees to claim a miscellaneous itemized deduction (subject to a 2% deduction floor) for unreimbursed business travel expenses. So if you didn't reimburse them, they used to be able to write this off themselves. However, the 2017 Tax Cut and Jobs Act (TCGA), suspended such miscellaneous itemized deductions for 2018 through 2025, that's I.R.C. Section 67, link on our website at peopleprocesses.com if you want to read about it. Therefore, the business standard mileage rate cannot be used to claim a deduction for unreimbursed employee travel expenses. Similarly, under prior law, an employee could claim a miscellaneous itemized deduction for the amount by which his or her actual expenses for driving exceeded the amount reimbursed by an employer, as well as for expenses such as parking and tolls that were not covered by an employer-provided mileage allowance. These deductions are also disallowed in any year during the suspension period 2018 to 2025. So if you don't reimburse your employees for...