Monday, January 3, 2011


Welcome to day 1 of the 2011 income tax filing season.

This first question arrived over the New Year holiday:

Q:  I've negotiated a mileage reimbursement for the company I work for. How is this handled on our taxes? KF, Florida

A:  If you are an employee of this company, they should provide you with a periodic report in a format requesting the same information as the IRS would. In this case, you would turn over the report, and they would give you a check as reimbursement. When you file your income taxes, neither the reimbursement or expense would need to be reported as the reimbursement is not reported on your W-2 form.

If you are an independent contractor, most likely the reimbursement will be included on the 1099-MISC form you receive in January. In this case you will need to report both the income and the expense to "cancel" it out on your tax return.

Tip  As many small employers don't understand income tax codes and regulations, it's always a good idea to save a copy of all reports turned over to your employer or company who engages you. This way, if your reimbursement is included in your W-2, you have the information to report the expense on your tax return.

No comments:

Post a Comment