General Inquiries

Vehicle Allowance Questions

  • 1.  Vehicle Allowance Questions

    Posted 02-20-2019 08:35

    We would like to see how others are administering the payment of a vehicle allowance to employees using their own vehicles for work. We have recently made some changes but are revisiting to try and streamline processes between the end users and our accounting department. Any help with the following questions would be extremely helpful. 

     

    1)  Do you pay a flat amount?

    2)  Do you pay this monthly?

    3)  Do you make this payment through AP or Payroll?

    4)  Do you reimburse work miles through AP or Payroll?

    5)  Do you offset (reduce) the allowance amount reported with the reimbursed miles?

    6)  Are you reporting the reimbursed miles on the W2?


    If using Vista by Viewpoint, how are you paying/processing through AP or Payroll? Or how does your process work?

    Thanks!



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    Megan Devine
    Accounting Manager
    Wagman, Inc.
    York PA
    (717) 764-8521
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  • 2.  RE: Vehicle Allowance Questions

    Posted 02-21-2019 08:20

     1)  Do you pay a flat amount?  Yes, this is only for certain management and executive positions

    2)  Do you pay this monthly? With each paycheck

    3)  Do you make this payment through AP or Payroll?  payroll

    4)  Do you reimburse work miles through AP or Payroll? Yes, when work travel is required at a distance greater than 50 miles from the office

    5)  Do you offset (reduce) the allowance amount reported with the reimbursed miles? No

    6)  Are you reporting the reimbursed miles on the W2? No, just the allowance

     

     

    Robert McManus

    Chief Financial Officer

    Direct: 404.965.9349 

    Main: 404.361.5154 | Fax: 404.965.9355

    PO Box 45717 | Atlanta, GA 30320

    www.msrs.com

                

     

     

     

     






  • 3.  RE: Vehicle Allowance Questions

    Posted 02-21-2019 09:34
    https://www.mburse.com/everything-you-need-to-know-about-car-allowances-and-mileage-reimbursements

    There are some tax issues to be aware of when it comes to auto allowances.  I included an article that gives so good descriptions on what would and wouldn't be taxable.


    1)  Do you pay a flat amount?  I have usually seen a tiered system based upon job position

    2)  Do you pay this monthly?  I have seen both weekly, and monthly.  I personally feel that if it is a flat amount it is easier to pay weekly.

    3)  Do you make this payment through AP or Payroll?  I would recommend putting it through payroll, one less item to set up in AP

    4)  Do you reimburse work miles through AP or Payroll?  Again I would set up a non-taxable earning code for this and run it through payroll

    5)  Do you offset (reduce) the allowance amount reported with the reimbursed miles?  It is best to talk to your CPA and get recommendations for your business, the tax laws have changed, and get a professionals advice.

    6)  Are you reporting the reimbursed miles on the W2?  If it should be taxable then yes report in on the W2

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    Jessica Alcott
    Sr. Business Consultant
    Palmer Consulting Group
    Chester MD
    (202) 461-3350
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  • 4.  RE: Vehicle Allowance Questions

    Posted 02-21-2019 12:29
    Edited by Svetlana Yepanechnikova 02-21-2019 12:29
    We handle it very similar to how Mid-south roof systems described it.

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    Svetlana Yepanechnikova
    VP of Finance
    Syserco, Inc
    Fremont CA
    (510) 498-1429
    ------------------------------



  • 5.  RE: Vehicle Allowance Questions

    Posted 02-21-2019 13:57
    Good Morning Megan

    To answer your questions as it applies to our company:

    1)  Do you pay a flat amount?  Yes

    2)  Do you pay this monthly?  Yes

    3)  Do you make this payment through AP or Payroll?  Through Payroll

    4)  Do you reimburse work miles through AP or Payroll? N/A

    5)  Do you offset (reduce) the allowance amount reported with the reimbursed miles? N/A

    6)  Are you reporting the reimbursed miles on the W2? N/A

    We do not use Vista so I can't answer to that.



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    Julie Johnson
    Controller/Office Manager
    Axys, LLC
    Palmer AK
    (907) 830-8920
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  • 6.  RE: Vehicle Allowance Questions

    Posted 02-22-2019 08:28
    1)  Do you pay a flat amount? Yes for management employees.  Hourly for field employees

    2)  Do you pay this monthly?  Every paycheck

    3)  Do you make this payment through AP or Payroll?  We have a non-accountable plan so we pay through payroll

    4)  Do you reimburse work miles through AP or Payroll?  Yes

    5)  Do you offset (reduce) the allowance amount reported with the reimbursed miles?  No these are not the same people getting an allowance

    6)  Are you reporting the reimbursed miles on the W2?  Yes, these are taxable payments.

    We use Vista.  For management employees it is set up as an auto earnings just like salary but with a separate earnings code.  For field employees it is recorded on their time card and entered with their regular time. it's also a separate earnings code.  Those that are seeking reimbursement, turn in a form documenting their miles, their supervisor signs off on it and gives it to AP to process.

    Hope this helps



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    Scott Wallace
    Otto Baum Company, Inc.
    Morton IL
    (309) 266-7114
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  • 7.  RE: Vehicle Allowance Questions

    Posted 02-21-2019 14:34
    Hi Megan,

    Our employee vehicle allowance is based on a monthly amount.  Since we pay our employees on a bi-weekly schedule, I take the monthly amount, multiply by 12 and divide by 26 to come up with the actual amount paid to our employees each pay period.  The allowance is paid through payroll as taxable income on a bi-weekly basis so that it can be set-up as a regular payroll item to be applied to each paycheck, instead of having to edit a check once a month to add the full amount.  Hope that helps!

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    William Ratliff, CPA
    CFO
    Scott Contracting, LLC
    Suwanee GA
    bill.ratliff@scott-contracting.com
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  • 8.  RE: Vehicle Allowance Questions

    Posted 02-21-2019 17:27
    Thank you everyone for the responses. If you are paying through Payroll as taxable income are you using the Federal supplemental tax rate?

    ------------------------------
    Megan Devine
    Accounting Manager
    Wagman, Inc.
    York PA
    (717) 764-8521
    ------------------------------



  • 9.  RE: Vehicle Allowance Questions

    Posted 02-22-2019 08:14

    Nope, regarding your withholding question.  Although it's a separate taxable earn code, the allowance just gets added to other weekly taxable income and withheld using the regular withholding tables.  If the employee doesn't like that (never had anyone complain here) he or she could always complete a new W-4.  As a side bar, I make adjustments to withholding table computations when we pay bonuses. 

     

    Robert McManus

    Chief Financial Officer

    Direct: 404.965.9349 

    Main: 404.361.5154 | Fax: 404.965.9355

    PO Box 45717 | Atlanta, GA 30320

    www.msrs.com

                

     

     

     

     






  • 10.  RE: Vehicle Allowance Questions

    Posted 02-22-2019 09:05
    Let me give everyone a rundown of how we are doing our vehicle allowance/mileage, suggestions/comments are welcome.

    Employee receives $800 per month vehicle allowance
    Employee submits mileage driven each month and receives $.24/mile; for this example 52 miles driven
    Payroll takes the miles driven that month multiplied by the federal rate less our reimbursed rate  (52 * ($.58 - $.24) = 17.68)
    This amount is deducted from the $800 (800 - 17.68 = 782.32) and the employee is taxed on this difference at the supplemental tax rate of 22%, social security, medicare, etc.

    I've discussed with our Payroll Manager, we are using the supplemental rate because it is a non accountable plan.

    I'm not sure we can make this any more complicated even though I think it is being done correctly. As you can imagine, employees are not happy and they are confused regarding the calculations, especially those who do not typically drive a lot of miles.


    ------------------------------
    Megan Devine
    Accounting Manager
    Wagman, Inc.
    York PA
    (717) 764-8521
    ------------------------------



  • 11.  RE: Vehicle Allowance Questions

    Posted 02-23-2019 09:28

    Does sound kind of complicated and time consuming the way y'all are doing it Megan.  And I could see where it lends itself to some confusion for employees, although y'all are certainly doing right by them.

     

     

    Robert McManus

    Chief Financial Officer

    Direct: 404.965.9349 

    Main: 404.361.5154 | Fax: 404.965.9355

    PO Box 45717 | Atlanta, GA 30320

    www.msrs.com

                

     

     

     

     






  • 12.  RE: Vehicle Allowance Questions

    Posted 02-25-2019 09:14
    ​This is how we do it as well.  We only give allowances to those that have significant business miles and run those through payroll as a non-taxable add on.  At the end of the year if the mileage turned in does not cover the allowance using the IRS maximum rate, the rest of the allowance becomes taxable income to that employee.

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    Ron Heemstra
    Controller
    Interstates
    Sioux Center IA
    (712) 722-1662
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  • 13.  RE: Vehicle Allowance Questions

    Posted 02-22-2019 09:35
    This topic comes up on this forum quite often.  As I have done before, I feel compelled to provide the related tax law perspective.  If you have an "accountable plan", meaning that your employees provide you a mileage report periodically for the business use of their personal vehicle and you reimburse them with a per mile rate not in excess of the IRS's published rate (currently $.545 per mile), your reimbursement check should be from accounts payable (not added to payroll).  That reimbursement will be deductible by the employer and not included in taxable income of the employee.  Any other method of reimbursement for business use of a personal vehicle is considered not to be from an accountable plan.  Such reimbursement should be issued as taxable payroll.  The problem with this latter method is that the employee will have additional income and no offsetting deduction for the cost of driving his or her vehicle for business.  In 2017 and prior there would be a partial deduction available to the employee if they fill out the employee business expense form, which fed to Miscellaneous itemized deductions on Schedule A (which were limited by a 2% of adjusted gross income floor).  Beginning in 2018, with the total disallowance of Miscellaneous itemized deductions on Schedule A, no offsetting deduction at all is available to the employee.

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    Daniel Lacey
    Clark Schaefer Hackett
    Columbus OH
    (614) 885-2208
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  • 14.  RE: Vehicle Allowance Questions

    Posted 02-26-2019 09:34
    As a matter of simplicity, we provide a payment with each paycheck for those who have a truck allowance. It's taxable income. There was a time many years ago when we tried to treat it as reimbursable, but found it difficult to impossible to get the Superintendents to turn in business mileage. I think that, as a practical matter, individuals view the truck allowance as part of their income.

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    Timothy Mickunas CPA, CCIFP
    Chief Financial Officer
    D. Wilson Construction Company
    McAllen TX
    (956) 686-9573
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  • 15.  RE: Vehicle Allowance Questions

    Posted 02-27-2019 09:05
    1. Yes, though there is a sliding scale based on position
    2. Yes. It is paid in arrears on the last check of the month.
    3. Payroll
    4. We run the calculation only at year end to reconcile the allowance paid less + fuel purchased - business miles driven and therefore calculate the taxable portion. It is run through payroll.
    5. Yes
    6. See # 4 above. ​

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    Bobby Redinger CPA, CCIFP
    CFO
    Timberlake Construction
    Oklahoma City OK
    (405) 840-2521
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  • 16.  RE: Vehicle Allowance Questions

    Posted 03-07-2019 15:20
    Megan:  We just started using TripLog to track business miles.  It is a phone app that was recommended by several CFMA members.  We pay a flat bi-weekly allowance through payroll.  We are on Vista accounting software but do not process payroll through it.  We only use the Payroll module for job cost and gl updates.  At the end of the year we will multiply the number of business miles by the IRS mileage rate and any excess vehicle allowance paid will be reported on the W-2. ​TripLog accumulates the business miles for the year.  The cost to the company is $60 per driver per year for TripLog.

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    Susan Milner
    Corporate Controller
    Eldeco Inc.
    Greenville SC
    (864) 312-9896
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