Mileage allowance
UNDERSTANDING MILEAGE ALLOWANCE
Most of us use vehicles for going to offices and coming back home. Different types of vehicles that are used by people for reaching their offices include cars etc. There are also some jobs where a person has to drive vehicle to other locations also during the office hours for performing the duties. If the employer is providing any vehicle for both situations mentioned above, it is absolutely no problem. Rather an employee would like to go to office in the company car and other locations too. But this happens with people that are at the top executive levels generally . Does it mean that lower cadre people or people who are not top executives have to pay for the expenditure towards covering miles for performing duties? No, it is not like that. In such cases, where the employer is not able to provide vehicle to its employees, it makes compensation by means of mileage allowance. The employee is also required to go to different places for attending seminars, meetings etc. Miles covered by employee for such reasons is also reimbursed in the form of mileage allowance. The reader may think that it is only a small support provided by the employer. But it is not so. Considering the prices of gasoline in present times and expecting an upward trend in future, mileage allowance is bound to become one of major benefits to the employee provided by employer.
QUAliFICATION OF EMPLOYEE FOR MILEAGE ALLOWANCE
The employer has the discretion of determining various rules and regulations regarding mileage allowance. Since each employer has different approach towards mileage allowance, the mileage allowance varies from one employer to another employer in percentage terms as well in terms of amount. The employer can also put restrictions regarding qualifications for the mileage allowance. If a person is working in a government company or organization, he has to abide by different rules and regulations regarding mileage allowance as prescribed by government. In case, a person is working in any private limited company etc, qualifying for the mileage allowance becomes bit difficult. It can also be the case that the post, at which a person is employed, does not carry any mileage allowance. Generally, it has been observed that there are only few private companies or organizations that provide allowance for miles covered by a person for reaching office and going back home.
The employees are also required to fulfill certain eligible conditions and provide some documentary proofs for getting the mileage allowance. These requirements vary from one employer to another. Generally, a person is required to provide a copy of his driving license, copy of registration of vehicle used by him, copy of his driving record, copy of insurance of vehicle etc for applying for the mileage allowance. It is advised here that if any person is claiming mileage allowance for the first time, he should get the above documents always ready.
HOW THE MILEAGE ALLOWANCE AMOUNT IS DETERMINED
There are some factors that determine the mileage allowance, if it is not granted on fixed basis. Generally, all the employees are required to maintain the mileage record for a month. The total number of miles covered by an employee is also required to be provided in some cases. There are also certain employers that provide mileage allowance to their employees on fixed basis. The employee is required to submit gasoline bills of certain volume and he is reimbursed the amount as per the prevailing rates of gasoline. In case the employee has to move out of station on their vehicle for the performance of their duties, it is better if the employee jots down the reading in the odometer at beginning of tour and at the end of tour. There are also many mileage tracking software available in the market that can be used for getting the mileage allowance calculated. There are also some companies that provide this software to their concerned departments to ensure that mileage allowance is being calculated as per the norms. The mileage allowance software also makes calculations easy and save valuable time.
In some countries, government has also set the upper limit for the mileage allowance up to which an employer can make reimbursements. This limit is determined on the basis of miles that an employee is expected to cover. For example, limit of mileage allowance for sales persons is more that those in the financial department. It is advised that a person invariably ask from his employer how much mileage allowance he would be getting for the performance of duties. Accountants are generally required to ensure that employee has made reimbursement of miles that are actually covered by him.
In countries like United States, there are many employers that provide mileage allowance to their employees as per the rates determined by government. For example, IRS or Internal Revenue Services is the organization in United States that provide rates for mileage allowance. If any employer uses reimbursement rates that lower than the rates prescribed by IRS, there is no need of maintaining extensive records for the same for income tax calculations. A person can easily claim tax deduction if he is required to drive for fulfilling his duties. This deduction is called as the IRS mileage deduction. Mileage can be written off only when they are used for the business or official purposes. If a person covers miles for his personal purposes, he is not eligible to get IRS mileage deduction. Most of employers in United States calculate the mileage allowance on per mile basis. A person is required to multiply this figure by number of miles and the amount arrived at can be deducted for the taxable income or salary. There are also some organizations that require a person to provide the odometer reading in the beginning of year as well as at the end of year, so that number of miles can be counted. A person is of course required to provide details about business miles covered. In case of IRS audit, these figures have to be provided. In the year 2005, mileage allowance was determined at 48.5 cents per mile, whereas for the year 2004, it was 37.5 cents per mile.
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