How do you distinguish between normal mileage and work mileage? Specifically, how do you distinguish between “home-to-work/work-to-home” commuting and “work-to-site/site-to-work” commuting?
The question above was posted on LinkedIn and I figured it would be important for Quino readers to know. Not to mention, I have dealt with this problem myself when recording my mileage.
Devesh Dwivedi on LinkedIn says, “If the employee goes to a client site and the mileage is less than normal commute (normal commute being, his home to your office/ primary place of him employment) then there’s no reimbursement however, anything traveled more than the normal commute should be reimbursed.
For example, if the employee visits a client 10 miles from his home and does not come in to office that day, the 20 miles roundtrip drive of the day will not be reimbursed for (being under the normal commute 40miles round trip in your case) however, if the employee visits the client plus comes at work then miles over normal commute should be reimbursed (20 miles in this case).” http://www.linkedin.com/answers/hiring-human-resources/personnel-policies/HRH_PPO/277363-230164?searchIdx=0&sik=1258516961637&goback=%2Easr_1_1258516961637
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In addition, in my situation, I was using my car to get to and from networking events. Some days I would go to the networking event from home and then go to the office after the networking event. Adhering to the processes set by my company, I would subtract 14 kilometres (my daily commute to work from home) from the kilometres accumulated to the networking event and back to the office. The Calculation would be 30 kilometres (mileage to networking event from home) + 40 kilometres (mileage from networking event to office) – 14 kilometres (daily commute to work from home) = 56 kilometres; therefore, after my calculation I am entitled to 56 kilometres for reimbursement.
As always, consult your accountant to be informed of your company’s specific tactics when addressing this issue. OR if you want to consult the Fair Labor Standards Act (FLSA) go to http://www.opm.gov/oca/worksch/HTML/travel.asp#commtime.
-Ashton Byrne, Marketing Coordinator for Quino Solutions Inc.
This is Part 2 of 2 outlining the government’s regulations about mileage reimbursement. This week I am discussing the IRS’ regulations for mileage reimbursement.
As I have mentioned previously, instead of having to navigate aimlessly through the government’s documents… let me do the hard work for you. Below is the “need to know” about mileage deduction according to the US government.
The IRS says,
“Deductible Car and Truck Expenses
Ordinarily, expenses related to use of a car, van, pickup or panel truck for business can be deducted as transportation expenses. Use of larger vehicles, such as tractor-trailers, is treated differently and is not part of this discussion. In order to claim a deduction for business use of a car or truck, a taxpayer must have ordinary and necessary costs related to one or more of the following:
Traveling from one work location to another within the taxpayer’s tax home area. (Generally, the tax home is the entire city or general area where the taxpayer’s main place of business is located, regardless of where he or she resides.)
Visiting customers.
Attending a business meeting away from the regular workplace.
Getting from home to a temporary workplace when the taxpayer has one or more regular places of work. (These temporary workplaces can be either within or outside taxpayer’s tax home area.)
Expenses related to travel away from home overnight are travel expenses. These expenses are discussed in Chapter One of Publication 463, “Travel, Entertainment, Gift, and Car Expenses.” However, if a taxpayer uses a car while traveling away from home overnight on business, the rules for claiming car or truck expenses are the same as stated above.
It is important to note that costs related to travel between a taxpayer’s home and regular place of work are commuting expenses and are not deductible.
Taxpayers can choose to use either the standard mileage rate or actual expenses to compute their allowable business deduction. They may want to figure the deduction using both methods to see which provides a larger deduction.
Standard Mileage Rate Method
The standard mileage rate may be used to figure the deductible costs of a vehicle that is owned or leased. If a taxpayer wishes to use the standard mileage rate for a leased vehicle, it must be used for the entire lease period. In other words, a taxpayer must use the standard mileage rate for the first year a vehicle is available for business use in order to use the standard mileage rate in subsequent years.
The standard mileage rate is adjusted annually by the IRS to reflect changes in the cost of operating a vehicle. In some situations it is adjusted during the year. The 2006 standard mileage rate of 44.5 cents per mile, as well as rates for previous periods, can be found at http://www.irs.gov/taxpros/article/0,,id=156624,00.html
The standard mileage rate is used in place of actual expenses. Taxpayers who choose the standard mileage rate may not deduct actual expenses, such as depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance or vehicle registration fees. Business-related parking fees and tolls may be deducted in addition to the standard mileage rate. Fees for parking at a taxpayer’s main place of business or tolls related to commuting to and from that main place of business are personal expenses which are not deductible.
Actual car or truck expenses include:
Depreciation, Lease payments, Registration fees, Licenses, Gas, Insurance, Repairs, Oil, Garage rent, Tires, Toll, and Parking fees
These and other expenses are discussed in detail beginning on page 16 of Publication 463. If business use of the vehicle is less than 100 percent, expenses must be allocated between business and personal use. Only the business use percentage of each expense is deductible.”
If you needed more information please contact the Internal Revenue Service (IRS). Also, consult your financial advisor or accountant for your specific company processes as they may be different from what the government is offering.
- Ashton Byrne, Marketing Coordinator for Quino Solutions Inc.
Do you deduct your mileage? Do you know all the details you need to know about logging your mileage? Most of us don’t and the government doesn’t make it easy to find the details. Therefore, instead of having to navigate aimlessly through the government’s documents… let me do the hard work for you. Below is the “need to know” about mileage deduction according to the government. There is a link at the end of this post for your own reference.
The CRA (Canadian Revenue Agency) says,
“Motor Vehicle Expenses
3. Where a “motor vehicle” is used by an individual in a taxation year partly to earn business income and partly for personal use, the deductible amount is normally that proportion of the aggregate of the
(a) total operating expenses of the vehicle incurred by the individual in the year,
(b) capital cost allowance, and
(c) interest
that the distance traveled by the vehicle to earn the business income is of the total distance traveled by the vehicle for the year. For example, where the aggregate of (a), (b) and (c) as described above for a year is $8,000 and the total distance traveled for the year is 32,000 kilometres of which 24,000 represent business use, the deductible amount is $6,000 determined as follows:
(24,000 ÷ 32,000) × $8,000 = $6,000
4. Should an individual own or lease two or more “motor vehicles” used partly for business purposes and partly for personal purposes, the above calculation may be applied separately for each vehicle or, for convenience, the calculation may be applied for both or all the vehicles taken together. That is, the operating expenses, capital cost allowance and interest (see 5, 13 to 20 and 21 below) for each “motor vehicle” may be combined and the deductible amount determined on the basis of the ratio of combined distance traveled for business purposes to combined total distance traveled, provided the result so determined is reasonable and not materially different from that where the determination is made for each vehicle.
5. The term “operating expenses” referred to in 3(a) above includes the cost of fuel, maintenance (for example, car washes, grease, oil and servicing charges), repairs (other than accident repairs-see 7 below), licenses, insurance and, except as noted in 6 below, “eligible” leasing costs (see 9 to 12 below), less the aggregate of all rebates or other amounts (except where used to calculate the “eligible” leasing cost) received or receivable by the individual for the expenses and not included in the individual’s income.
6. Where an individual, who leases a “motor vehicle” on a long-term basis but is not entitled to claim capital cost allowance on it, makes frequent use of the vehicle during normal work hours for business purposes, but the distance traveled for that purpose is comparatively low, the “eligible” leasing cost (see 9 to 12 below) for that vehicle may be excluded from the operating expenses if the individual so requests and the circumstances warrant it. The “eligible” leasing cost is then apportioned on the basis of a reasonable combination of distance traveled and time the “motor vehicle” was used for business purposes. For example, if a “motor vehicle” were used for business purposes five days out of seven in a normal work week, it might indicate that (allowing for personal use in the evening, usual holidays, time off for sickness, etc.) it was used 65% of the time for business purposes. If, on a distance-traveled basis, the vehicle were used only 25% for business purposes, combining the two factors might suggest that 45% of the “eligible” leasing cost should be attributed to business use. However, where a “motor vehicle” is used infrequently for business purposes, the apportionment must be on the distance-traveled basis alone, even though the vehicle is available at all times for business purposes.
7. Accident repair expenses, whether incurred to repair damages resulting from the accident to a “motor vehicle” driven by the individual or to the property of others, are deductible in full if the vehicle was being used for business purposes at the time of the accident. Any amount deductible is net after recoveries through insurance or damage claims. No portion of such expenses is deductible if the vehicle was being used for personal purposes at the time of the accident.
8. To be deductible, “motor vehicle” expenses must be reasonable in the circumstances and supportable by vouchers. (The vouchers need not be filed with the individual’s income tax return; however, they must be retained for examination on request.) A claim by an individual for “motor vehicle” expenses calculated on a cents-per-kilometre (mile) basis is not acceptable. To support a claim where a “motor vehicle” is used in part for business purposes and in part for personal purposes, a record should be kept of total distance traveled and distance traveled for business purposes in a year. The record should contain at least the date, destination and distance traveled for each trip.” http://www.cra-arc.gc.ca/E/pub/tp/it521r/it521r-e.html
If you needed more information please contact the Canadian Revenue Agency (CRA). Also, consult your financial advisor or accountant for your specific company processes as they may be different from what the government is offering.
FYI: This post is part 1 of 2 that will outline exactly what the government says about deducting your mileage. Next week I will post the details for mileage deduction according to the IRS (Internal Revenue Service).
Hope this helped 
-Ashton Byrne, Marketing Coordinator for Quino Solutions Inc.
YES
The IRS issues the maximum rate allowed for reimbursement, whether or not a company adheres to that rate is the company’s decision. There could be three situations:
1. An employer has a lower rate than the IRS.
What does that mean for you?
- You are not getting “jipped;” but you should claim the difference as an expense.
2. An employer has the same rate as the IRS.
What does that mean for you?
- Most employers should ask you to keep records for the company’s tax purposes.
3. An employer has a higher rate than the IRS.
What does that mean for you?
- You should claim the difference as income. In addition to keeping records for tax purposes.
The answers above should also pertain to the Canadian Revenue Agency for those Canadian readers.
*If you have any questions or concerns about mileage reimbursement rates please contact your company financial administrator, the IRS, or the CRA. Quino Solutions is not responsible for the reimbursement of any mileage expenses.
Yet, what does the HST mean for you and your vehicle expenses. It won’t effect your mileage deduction, the 52cents that you deduct per km is a flat rate; therefore, the HST shouldn’t have an effect on your mileage logging. But, there will still be an addition HST charge when servicing or fuelling your vehicle.
Fortunately, companies will be eligible to claim back 12% of tax spent. Unfortunately, consumers will have to “eat up” the additional 7% (12% HST – 5% GST).
What do you think about the HST? Leave your opinion below. Post a comment and tell the rest of Quino’s readers how you feel…
- Ashton Byrne, Marketing Coordinator for Quino Solutions Inc.
*Note: the information above was gathered from the BC government and the Vancouver Board of Trade. If you have any questions or concerns regarding the HST, please contact the BC government for answers.
We, at Quino, have developed our software to accommodate to the government’s regulations according to vehicle use for business purposes. Therefore, because we serve to protect our clients from audits with either the IRS or CRA, we figured an update would be nice.
The Minister of Finance Jim Flaherty announced, late last year, some key points for automobile deduction limits and expense benefit rates for businesses:
Capital Cost Allowance (CCA) stays at $30000 for purchases after 2008
The limit of deductible leasing costs have remained at $800/month
Maximum allowable interest deduction for borrowed or purchased after 2009 remained at $300/month
The tax exempt, for employees using their personal car for work, remained at a 52 cents limit up to 5000km and 46 cents for any additional kilometres. If you live in the Yukon Territory, Northwest Territories, or Nunavut that tax exempt is 56 cents up to 5000km and 50 cents for any additional kilometres. The personal portion of automobile operating expense paid by employers remained at 24 cents per kilometre
We hope that you found this update helpful and beneficial. If you want to stay informed about “the need to know” for the government’s automobile limits and rates for businesses follow us at…
Follow us on twitter: @QuinoSolutions
Follow this blog. Updated weekly… at least
-Ashton Byrne, Marketing Coordinator
Note: The deduction limits and expense benefit rates above are taken directly from the Canadian Government’s website. If you need further clarification of any point above contact the government directly. http://www.fin.gc.ca/n08/08-114-eng.asp
A blog post from Quino Solutions’ old website… Worth reading
As a small business owner, reviewing costs and analyzing what is best for the company’s cash flow is at the forefront of my mind daily.
We recently hired a salesman for our company. We had never had anyone dedicated to sales before so the expenses arising were new to me.
I contacted our outside accountant and viewed the Revenue Canada website. I confirmed that the prescribed rate to reimburse an employee was 52 cents per km to cover gas, insurance and car payments etc. So I notified our salesman to keep track of his business km driven for business purposes using our “MileTracer” product. The system works beautifully. He checks his mileage report from our “MileTracer” product and reports it to me at the end of each month.
The other owner of the business reviewed the expense report and said that looks a little high to me, wouldn’t it be cheaper just to pay for a company car and pay the gas and insurance costs? Well, I had been paying about $200 a month to cover the mileage km driven. So I immediately began to create a cost benefit of the situation.
It would cost about $200 a month in car payments for a compact car. About $1,600 per year in insurance and on top of that about $100 a month is gas receipts. There is no mention in this scenario yet of car repairs and maintenance. It was clear that reimbursing by the km was a lot better for our small business as cash flow is king.
The only scenario is where a sales rep drives many km per week and is constantly on the road. If a sales rep averaged 200 km per day in driving. I had met one once who worked for McCain’s and drove constantly from one supermarket to another. They would average about 200 km (day) x .52 cents = $104 in mileage costs times around 22 days per month – this bill would be $2,288 monthly to the company. In an instance such as this with a salesman constantly on the road it definitely makes sense to foot the bill for the car payment and the insurance etc.
So, the results are if you have a salesman who just visits a few customers around town then definitely go with the mileage reimbursement based on km driven. If you do, however. have a salesman who is constantly on the road for days at a time it is definitely cheaper to go with paying for a company car.
- Natalie Pinter, VP Finance of Quino Solutions
The MileTracer reduces your taxable income by accurately recording your mileage for tax deductions!
The MileTracer generates audit-proof reports for your business mileage.
Never worry about tax audits again!
