Proudelitist

That's fine. I was addressing the notion that expense reports could be fudged and falsified to profit the individual employee. For example, claiming mileage on a rental car.

Kevin AA

Mileage reimbursement is to reimburse you for the estimated cost of driving your own car for a business purpose, which is depreciation+maintenance+fuel. If you rent a car, you only pay for the rental and fuel, so your reimbursement should be for the rental and fuel. An expense report where you claim expenses that are without a doubt higher than reality is fraudulent (a "side gig" to put it nicely).

It's no different than if you needed to fly there, so you submit an expense report for full fare Y but in reality buy a cheap ticket -- fraud.

No, because driving the car on a business trip (as opposed to sitting in your driveway going nowhere) depreciates its value, uses fuel, and increases maintenance costs. Your gifted car is now worth less because of the business trip, thus perfectly fine to claim mileage on that.

Of course, if the car was gifted to you by your employer, that is a different story.

cbn42

The standard mileage reimbursement often has nothing to do with "reality". It's a broadly calculated average that could be way off depending on your circumstances.

If my car only costs 20 cents a mile to drive (old, depreciated car with high fuel efficiency), but I claim the full 55, is that fraudulent? Of course not. That's the standard that they have agreed to pay you in lieu of calculating actual expenses.

It's no different from packing your own lunch and pocketing the per diem meal allowance, which is not fraudulent either, even though you are profiting from it. In both cases, the employer is paying you a flat reimbursement rather than your actual expenses. If your actual expenses are less, you can keep the difference. If your actual expenses are more, you pay the difference.

That would definitely be fraud because you are falsifying your report by submitting a receipt for a ticket that you did not purchase (or maybe purchased and refunded).

HMO

I believe I finally understood your point. There are several scenarios to consider, and because of the bad apples, it's easier to have a unified rule instead of several exceptions.

If the trip is starting at the employee's location (home or office), if the employee is renting a car on the company dime, then you are completely right. But if the car was rented on employee dime, because reasons, then I don't see a problem to claim mileage, if they are not claiming the rental. Claiming both are fraud.

If the company gives the option (rental or mileage), because the employee is at company capacity, they need to choose the most cost-effective for the company, not for himself. I don't know if renting a car on their dime and claim mileage to pocket some change cash is illegal or fraudulent, but it may be considered anti-ethic

But if the company mandates to rent a car, then they cannot claim rental and mileage, only the rental.

Almost the same case when the employee flies to somewhere and need a car to reach the customer. Because they will be obligated to rent a car, there is no excuse to rent on employee's dime and claim mileage.

Often1

Analogies rarely work. When it comes to this, they never work.

What matters is tax law and employer policy. If a US employer reimburses a US employee at per diem rates, that is fine in lieu of actual receipted food expenses. If the same employer reimburses an employee at a set mileage rate for a rental vehicle which costs the employee less, the delta between the two amounts is income to the employee and the employee will have filed a false return and caused his employer to do the same.

Kevin AA

What do you mean, it has nothing to do with reality, yet it is the average? Average of non-reality?

If you choose to drive an old econobox, you do get back more in expenses than you spent in costs. If you choose to drive a new expensive gas guzzler, you spend more on travel than what you get reimbursed for. The tradeoff is that driving an old econobox is no fun while driving a new expensive gas guzzler is a blast. It's fair.

The per-diem meal reimbursement is similar... you can spend the time it takes to go grocery shopping in a city that you don't live in and eat in your hotel room, make some money on the expenses, but have a lot of inconvenience. Or you can go to a really nice restaurant and wine and dine yourself and only get partially reimbursed -- as opposed to doing that w/receipts instead of per diem, and then your expensive meal is rejected because it's extravagant. That is also fair.

thebigben

Sounds fair, I'd expense the parking costs, that should be $100 or so

emma69

Just because I happened to be having a coffee with someone in our accounts department this morning, I asked the question. The reason they reimburse at the customary rates used by the tax authority is because it is easy, and no one argues with it (employees, or the tax authorities). They do not report mileage to any tax authority, and the amount paid is lumped in with other cost of doing business expenses for their business tax purposes. There is absolutely no requirement for me to own the car driven, I could make my way from A to B by any means I like, but would be pretty dumb to use a more expensive method and claim mileage, but it was acknowledged sometimes people do that when they lost a cab receipt, as it was easier than explaining the missing receipt. She wasn't quite sure why anyone would use mileage for the rental car, since she reckons the cost of the rental, plus gas, plus insurance would almost always be more, but she said she couldn't think of a reason it wouldn't be allowed, provided there was no double dipping. She said that if for some reason the business wanted to claim mileage, she thinks they would be required to have a log book of miles driven and purpose, just like individuals have to have when they report on individual taxes, and she said that seems like way too much aggravation for any company, except those operating fleet vehicles.

bergamini

Yes! I know accounting and was trying to explain this earlier, less well than you, to someone who was saying that it would ultimately be a felony to do so and they'd file the charges. Thanks. The IRS mileage reimbursement rate is a guideline and the rules for it only apply if you are deducting them on your personal taxes, including the rules of ownership.

Often1

If your employer chooses to reimburse you are above the IRS mileage rate, iti is free to do so. But, it would then me required to issue a 1099-MISC to you for the difference. That is income to you, although you are not obligated to accept the 1099 as gospel and could document your expenses otherwise (not likely).

What your water cooler advisor in accounts does not appreciate is that nobody reports any of the internal numbers in ant event. They get found out in an IRS audit which comes about because someone gets in an accident in the vehicle and the plaintiff is trying to figure out if he has a case against the employer with a deep pocket.

darthbimmer

Why would a civil suit plaintiff in a personal injury case shopping for deep-pocketed defendants cause the IRS to launch a large, costly audit? It seems to me the audit here would be the employer's own auditors/lawyers researching the facts of the case to determine their response to the civil suit. And even there, they may deem the minute details of how the employee was reimbursed for the car trip immaterial.

jrl767

some who frequently post here on FT are inclined to go deeply -- and overly pedantically -- down hypothetical rabbit holes to make a "rules are rules" point

rbwpi

Great euphemism for the so called experts, mavens.

Often1

Coverage.

All the bad stuff comes out in the context of the efforts to pin blame.

bergamini

I do think it's possible a good PI attorney would try to find coverage through an employer, but the IRS isn't going to launch an audit because someone didn't get a 1099 for the difference between mileage and rental costs, especially when things such as travel to get the rental, gas for the rental, insurance, etc., would all legally be allowed to offset it. But yes they would try to find an employer's policy for sure but at that point it doesn't matter to the employer or their insurer who owned the vehicle in question and, of course, the employee would have to be conducting business during the driving. And there are already deep pockets on the rental because most rental agencies carry a $1M liability on every vehicle. Risk Management and Accounts Payable are separate departments.