The Ins and Outs of COVID-19 Mileage Reimbursement

May 5, 2020 | Article

The impact of COVID-19 has caused many organizations to review otherwise standard operating procedures in the wake of office closures, especially those required by governmental orders.

One such operational item is the reimbursement of mileage to an employee using their own vehicle for employer business purposes.

How Mileage Was Previously Reimbursed
Prior to COVID-19, an employee, typically assigned to one office location, would use reimbursement guidelines for business miles driven and typically consider their assigned office location as the starting point for determination of reimbursable miles. Using this methodology, reimbursement for their commuting miles, getting from their personal residence to their assigned office location, would not be reimbursed.

There were those occasions where, on a given day, an employee having no need to first go to their assigned office location could go directly to an employer business event for the full day or to multiple employer business events during the day, without going to the office location. For these type days, there was no adjustment required for the commute to the office to reduce the reimbursable miles driven. And, other combinations of employer business travel events would perhaps only require a single leg of the typical two-way commute mileage be considered commuting.

The Impact of COVID-19 on Mileage Reimbursement
However, with the various COVID-19 required, or protective, closures of otherwise usual office location work, a home-based employee work environment has been created. As a result, the question of how to handle the otherwise adjustable commuting miles for the reimbursement of employee business miles driven needs to be addressed. And, those adjustments will likely also create the need for modification of existing reimbursement plans.

While there should not be a need for an employee to change their substantiation of costs to be reimbursed, there will be a need to advise employees related to the documentation of the mileage to be submitted. Employee taxation of reimbursed amounts will continue to be contingent on whether a reimbursement is made under an accountable or nonaccountable plan.

Mileage if the Office Location is Closed
The key element for making changes in an employer mileage reimbursement plan is having their usual office location closed. If the office location has been closed, there is no need for an employee to go to the office location before traveling to an employer business event. Therefore, there should be no need to adjust the reimbursed miles for commuting miles. The employer reimbursement plan would need to be modified to record when the office closed and that until further notice the office would remain closed and employees are therefore not required to travel to the office to work.

Mileage If the Office Remains Open
However, the office may not close for all operations; it may remain open for certain functions. For those employees required to work at the office location, the reimbursement policies prior to COVID-19 events would be observed. Nothing really changes for these employees. But, for those employees not required to go to the office location, they would be documented as serving at, and for, the convenience of the employer by working from their home location for the employer’s business purposes.

That is an important designation because it should allow the principal place of employer business to transfer to the employee’s home for the determination of reimbursable miles, even though the usual office location is still open for other functions. As a result, the employee does not have to consider a mileage reimbursement adjustment for the commute to the office, because, in effect, for mileage reimbursement, the employer office is now the employee’s home, until subsequent events change such designation.

There are other potential employee deductions that could arise for consideration when using an employee’s home for an employer’s business purpose, those potential deductions require more complex analysis.

Keep Informed on Potential Changes in Guidance
Currently the IRS has not provided official guidance related to mileage reimbursement. It’s important to keep informed on the release of new guidance by the IRS in case it modifies the way items like mileage reimbursement may be tracked in the wake of COVID-19.

There’s a lot to consider when it comes to the organizational impact of COVID-19.

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