Duvall & Associates, Inc.
BUSINESS ADVISOR NEWSLETTER
 

Negotiate travel reimbursement before business trip

- by Alan Duvall 

Published in Dayton Daily News  October 14, 2007 

“I was born a travlin’ man.  That’s all I’ll ever be.”  -Lynyrd Skynyrd 

In the tax world, business activities are blessed with tax-saving deductions while personal acts yield strictly out-of-pocket expenditures for individuals. 

Take vehicle travel costs.  Expenses incurred commuting to and from work are considered personal in nature and thus rendered non-deductible.

Having reached your initial place of business, additional work-related travel costs for the day are deductible, calculated on Form 2106 either by way of exact accounting, or alternatively, the IRS mileage rate (currently 44.5 cents per mile). 

Unreimbursed business travel costs are itemize-deductible on employee federal returns.  As such they are subject to deduction limitations based upon the employee’s income and generate no savings at all on Ohio returns. 

Therefore, it is generally mutually beneficial for employees and employers to negotiate travel reimbursement arrangements.  Employer reimbursements equal to federal deductions are non-taxable to employees, thus saving income and FICA taxes.  In turn, employers save their portion of FICA taxes on such reimbursements. 

Interest loan expenses on individually owned vehicles are also personal in nature and non-deductible.  Therefore, the deduction of such interest is a major incentive for business owners to title vehicles in the company name.   

If company vehicles are utilized for personal purposes, the value of such non-business use must be added to the employee’s W-2 wages for the year.  

For legal and tax purposes, it is recommended companies adopt a written vehicle usage policy which strictly prohibits the use of company vehicles for any personal purpose beyond (perhaps) commuting.  If the vehicle is allowed for commuting, the rationale for such extra-curricular activity use should also be documented.   

Working in unison, employees and businesses can structure ownership and expense arrangements to maximize mutual tax benefits from the business use of vehicles.  

“We, the people, can...come together and make it work.”  Bob Marley

Alan Duvall is a certified public accountant in Dayton.  Contact him at Alan@Duvallcpa.com.  Previous articles archived at www.duvallcpa.com.