commute mileage deduction by employer

[Johnschilling]

As an Employer we have an IT employee who's home base is this office and he has a desk/phone here. However, as part his job he must travel to three sites occassionally for various IT support functions as needed. He has been doing so now for 5 years. Since he lives about 20 miles away from his home office base, when he has to travel to a plant for the day he sometimes will drive straight to the plant from his home and back home at the end of day. Our comapny policy has been to reimburse him for his total travel time less his normal commute mileage. My question is this correct? Does the employer get the tax dedcution as a business expense because the employee leaves from his home and we reimburse? What if we paid the whole commute? Thanks. John

State Ca. I assume since in the Ca. law forum. Betty3

[Betty3]

John, you added your question to another poster's thread. You should have started your own new thread. I will start one for you.

[DAW]

The OP has several very unrelated issues here. Specifically, travel time, expense reimbursement and taxability/deductibility of expense reimbursement.
- If you are talking about whether the employer must pay for the travel time, that is a function of federal DOL and CA-DLSE regulations. The federal regulations are 29 CFR 785.33-785.41. The CA-DLSE rules can best be found in the CA-DLSE manual.
http://www.dol.gov/dol/allcfr/ESA/Ti...9CFR785.33.htm
http://www.dir.ca.gov/dlse/Manual-Instructions.htm
- If instead we are talking about expense reimbursement, we are talking about the minimum wage related "free and clear" rules for the feds (meaning only an issue for employees paid near minimum wage), and CLC 2802 for CA. Again the CA-DLSE manual is the best place to look this up. Also, the OP is trying to mix travel time and commute mileage into the same action. Technically these are legally unrelated to each other.
- If instead we are talking about "deductibility/taxability" (sort of two sides of the same coin), then we are now talking about IRS rules (federal) and FTB rules (CA). These rules are completely unrelated legally to travel time. Mileage is sort of an issue, not in the "is the employer required to reimburse" (not IRS/FTB's concern), but rather in the "if we reimburse, is this taxable", which is an IRS/FTB issue. I can say that the IRS rules can be found in IRS publication 463 Travel, Entertainment, Gift, and Car Expenses.

[Johnschilling]

Publication 463 disagreement

I have read Publication 463 and my understanding is that this is for employees and self-employed people's use as it realtes to deductability for unreimbnursed business expenses. The rule inbedded in Pub.463 you are referring me to is for temporary work location rules. IF our employee was not reimbursed or IF our employee was actually self-employed and met the test for temporary work location for travel milage (assuming he is a salary employee) then it is deductable as a business income offset for his/her business/personal tax return.

My question is (from the employer's view), as a C corporation, is the reimbursement for an employee from his/her home to a site and back home less his normal commute mileage a legitimate businesss income offset on our 1120 tax return? If it is, should we reimburse all of his commute miles for the situatuon described above? Or, if it is not, should we not reimburse at all; and if the employee feels they meet the requirements for a temporary work location then they can pursue a deduction on thir tax return?
Thank you,
John

[DAW]

I am no 1120 (or 1040) expert, but my understanding is that "normal" commutes are not "qualified" business expenses under IRS rules. My understanding is that IRS tends to not write publications separately for each target groups and that the rules in 463 are functionally comparable over all classes of users (employees, self-employed, and employers). That functionally "deductible" (for a taxpayer) and "taxable" (for an employer) are functionally the same thing. An expense is either "qualified" or not, and a "qualified" expense would "deductible" for the taxpayer or "non-taxable" for the employer/employee, once in total any how. My understanding is also that IRS could not care less what the federal DOL rules are in this area, or the CA rules for that matter. That IRS rules stand by themselves, and apply to the "taxability/deductibility" question only.