milage reimbursement repayment?

Question

Can an employer pay for mileage, and then ask for it back at the end of the month?
I thought if mileage was paid it was declared to the IRS.
If so, how can an employer ask for it back?
(Legally?)

Answer 1

If the employer gives you an amount of money for expenses at the beginning of the month and then you account for what you spend your employer is running an accountable plan. Under this arrangement you do not have income and nothing is reported to the IRS.
If the employer did not operate in this manner the money they give you each month would be added to your W-1 wages and you would pay tax on what you don't spend. You would also have to itemize your deductions in order to deduct the business expenses.
I think your employer is doing the plan in a manner that results in the best tax situation for you.

Answer 2

One of the requirements of an accountable plan is that any excess payments must be returned to the employer. If you are not required to return excess payments to your employer, then you have a nonaccountable plan and all mileage payments you receive will appear in Box 1 of your W-2 and be subject to income tax as well as Social Security and Medicare Tax. You would then deduct your expenses on Schedule A subject to a 2% of AGI floor.

Accountable plans do not appear on your W-2 are you are reimbursed with tax-free dollars. Payments are not reported as income to the IRS.

Answer 3

If your employer advanced you expense money at the beginning of the month under an accountable plan and you did not use the funds for authorized expenses, you would have to return the funds to the employer at the end fo the month or the excess would be added to your taxable income.