Question for the Tax Accountant type guys.

[Buoy]

Monday I have a 3rd interview with a Co.
Meeting with the owner, already met with 2 Managers, so this looks quite promising.

Anyway, it's construction work that will have me running out of my own vehicle.
Could definitely amount to a lot of miles.
The Co. pays $0.25 per mile from the shop to/between job sites, and they pay your trip home if you are working a long distance away (~2 hrs/100 mi...).
They are doing this to help cover fuel expenses - sounds fair.

I used to own my own Construction biz, and I always tracked my mileage, and was able to write off my milage at the end of the year as expense at the going Gov't rate (I think at that time it was $0.35/mi).

So, if the Co. is paying $0.25 per mi, would I consider this as normal income, and then write off at the current Gov't rate (I believe it's around $0.50/mi)??

And, should the $0.25/mi the Co is paying me be taxed as income, or,???
Or, should it just be a free and clear $0.25 per mile??

:huh::huh::huh::huh::huh:

[fund razor]

Current IRS rate is .485, I believe.

You can claim that as income and turn in your miles as a deduction at the IRS rate.

But, just remember that actual cash has a greater value than the write off. (I read that and said "duh") If you can avoid claiming the reimbursement by not deducting the miles, I think that you benefit. Not sure if you can.

They are screwing you, btw.

*As always... consult your tax advisor.

[fund razor]

Well... they aren't screwing you compared to nothing, of course. :D

[Buoy]

Current IRS rate is .485, I believe.

You can claim that as income and turn in your miles as a deduction at the IRS rate.

But, just remember that actual cash has a greater value than the write off. (I read that and said "duh") If you can avoid claiming the reimbursement by not deducting the miles, I think that you benefit. Not sure if you can.

They are screwing you, btw.

*As always... consult your tax advisor.

How so? Construction gigs usually don't pay any mileage.

I'm thinking if they are paying the mileage, and I can still write off my vehicle expense, it's not that bad.

[Buoy]

We were typing at the same time.:)

[fund razor]

Yeah, that's why I added compared to nothing. I forgot that it is uncommon to that gig.

[fund razor]

We did it again.

Stop it.

[Bobcat]

Don't take any tools to the job site that were purchased from late night TV ! (the ronco pocket drill):sifone:

[Buoy]

Don't take any tools to the job site that were purchased from late night TV ! (the ronco pocket drill):sifone:

Note to self:

Shop at Harbor Freight this weekend.:)

[Andrew]

Assuming you'll be a W-2 employee and not contract labor you can deduct the difference between the amount the employer will be reimbursing you and the standard mileage rate ($0.55 in 2009 and $0.50 in 2010 :huh:) on your tax return. You'll report the expenses on form 2106 and they are subject to a 2% of AGI floor. The expenses may or may not be reported on your W-2 but if it is they should be taxed as income.

[Buoy]

Assuming you'll be a W-2 employee and not contract labor you can deduct the difference between the amount the employer will be reimbursing you and the standard mileage rate ($0.55 in 2009 and $0.50 in 2010 :huh:) on your tax return. You'll report the expenses on form 2106 and they are subject to a 2% of AGI floor. The expenses may or may not be reported on your W-2 but if it is they should be taxed as income.

Yes, I will be a W-2 employee.
So, should the mileage they pay me be taxed prior to hitting my paycheck?
Or should it be handled seperately (seperate check)?

If the Co. is paying me mileage as compensation (part of income for the job I'm doing) should I not be able to deduct the full allowance from the Fed ($0.50~/mi) as long as the mi. I'm being compensated for is taxed?

I hope I'm explaining this properly.

And, Andrew, thanks for jumping in and discussing this with me!:)

[Andrew]

Basically if you're compensated dollar for dollar for and expense that is required for you to perform your job then the company is said to be providing you with whatever is being expensed and it does not need to be reported on your W-2. Obviously, since you are compensated 100% you can not deduct the expense on your tax return.

In your case you are being partially compensated and because of the increased potential for abuse when you are compensated in this way, the IRS views this as additional compensation and should be included as wages on your W-2 (box 1).

Now having said this there is some wiggle room in the second scenerio and many company will not include this compensation as wages to save themselves (and you) Social Security and Medicare taxes.

Since you are not being fully compensated you are going to want to deduct the mileage expense on your tax return, how much will depend on how the company reports the compensation.

http://www.irs.gov/pub/irs-pdf/f2106.pdf

I've linked the Form 2106 above for reference.

No matter how the compensation is reported you'll want to calculate the mileage expense on Part II of the form and record that on line one along with any other job related expenses you are not fully reimbursed for on the subsequent lines.

Here's where the difference is:
if the compensation is in box 1 of your W-2 do not put any amount in line seven and deduct the full amount of the expense(s)

if the amount is not in box one then record the amount compensated on line to reduce the deductable amount by the amount reimbursed


Hope this helps

[Buoy]

Andrew, that is a HUGE help!

Thank you.

I hope you don't mind, I may have some more questions when I find out more.

[Andrew]

Glad I could help, let me know if you have any other questions.