If the employer underpays on mileage, you have a deduction

Can They Do That?

Your Money

May 23, 2004|By Carrie Mason-Draffen

My employer reimburses us for mileage when we use our cars for company business. Currently, we receive 31 cents per mile. But the 2004 IRS mileage rate for business travel is 37.5 cents. Shouldn't we receive that rate? If not, do we claim the difference on our taxes?

You're referring to the IRS' standard mileage rate. And yes, you can claim the underpayments on your tax return. The official rate is just a guideline. The mileage rate, set annually and based on the cost of operating a car, is sort of like a "suggested retail price" for employers. Companies can adopt that price, or set theirs above or below it. "The employer is not obligated under the tax law to pay only the standard mileage rate," said Kevin McKeon, an IRS spokesman in New York.

The rate the company adopts has tax implications for its employees. Generally, if your car-mileage reimbursement falls below the IRS rate, you can deduct the difference between the two rates as an unreimbursed business expense on your tax return. But it's not as simple as it seems, because the deduction is subject to an adjusted gross-income ceiling. If, on the other hand, your reimbursements somehow exceed your actual expenses, you could wind up owing Uncle Sam, because that extra cash is considered income.

For more information, go to www.IRS.gov and plug "463" into the publications search engine. Or call the agency at 800-829-1040.

Carrie Mason-Draffen is a columnist for Newsday, a Tribune Publishing newspaper. E-mail her at yourmoney@tribune.com.

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