Helping your employees reduce car expenses

How to help your employees reduce car expenses

First of all, practicing safe driving is one of the easiest ways to avoid different accidents and any additional investments in your car: 

1. Don’t get distracted on the road. Avoid using your cell phone while driving, and use it for emergency purposes only. Pullover if you have to use your cell phone anyways.  
2. Develop the right attitude about driving. Many teen auto accidents are a result of attitude and maturity, not skills or knowledge. Make a commitment to yourself to practice a responsible attitude about driving. You’re controlling over 3,000 pounds of fast-moving metal, and you owe it to yourself, your passengers, and other drivers to drive responsibly. 
3. Limit your night driving. Accidents at night are likely to happen 3 times more often.  
4. Don’t drive drunk. Even if you consumed just one drink it still impairs your reaction time and judgment. Driving under the influence of alcohol or drugs can not only cost you your driver’s license but your life. 
5. Drive a safe vehicle. Shop for cars with high safety ratings. Avoid small cars, trucks, or sport utility vehicles. Check out federal statistics and consumer report literature to help to evaluate the safety rating of a car or truck. 
6. Always wear your safety belt. 

 Here are some tips which will help your employees to use fuel more efficiently: 

1. Driving at a speed which optimizes fuel consumption 
2. Accelerating gradually to avoid over-revving 
3. Keeping windows closed at high speeds 
4. Keeping tires at optimal inflations levels 
5. Limiting the number of your passengers. Every additional passenger adds an extra risk of a car accident. 
6. Avoiding harsh braking to let car stop naturally 
7. Removing roof racks when they’re not being used 
8. Removing excess clutter from inside the car to reduce the weight 
9. Encouraging your employees to keep their cars as aerodynamic and operationally efficient as possible, and to drive in a fuel-efficient way, will mean they won’t need to fill their cars up as often. This also means they will also have more fuel to use for purposes other than their commute to work.  

 Employee automobile/mileage reimbursement

 As an employee, you’ll have to provide a mileage log, gas receipts, and documentation of any other allowable expense receipt related to your car. It has to be detailed, otherwise, your report may get rejected as it might be considered fraudulent. That might violate employers’ policies just like with the IRS.  

Our advice is to set up a mileage tracking app that automatically tracks your driving.  

 What you can do as an employer? 

Provide your employees with a flat car allowance, which could be $500 a month. That cost can cover gas, tires, and some general car maintenance.  

FAVR programs. Employers reimburse employees under a fixed and variable rate (FAVR) reimbursement program, in which employees are reimbursed for fixed costs. Those can be taxes, insurance, and registration fees), as well as other vehicle expenses such as fuel and maintenance. The reimbursements are tax-free to employees in case of meeting certain requirements.  

 What about taxes?

Mileage reimbursements are considered tax-free as long as they’re documented and don’t exceed your actual expenses. As an employer, you can’t pay directly for car services like maintenance without pay off taxes. Expenses like tolls, which are directly related to business transportation expenses can be reimbursed without taxation. Make sure you got all the receipts, and you’re good.  

If an employer does not reimburse car expenses, then you have an option to offer to reduce salary in exchange for reimbursement since the reimbursement will be sheltered from taxation if expenses are documented appropriately. Alternatively, you might negotiate a higher salary to account for the added tax burden under the new tax law. 

 According to the IRS, despite the suspension of miscellaneous itemized deductions, deductions for expenses that are deductible in determining adjusted gross income are not suspended. For example, members of a reserve component of the Armed Forces of the United States (Armed Forces), state or local government officials paid on a fee basis, and certain performing artists are entitled to deduct unreimbursed employee travel expenses as an adjustment to total income on line 24 of Schedule 1 of Form 1040 – 3 – (2018), not as an itemized deduction on Schedule A of Form 1040 (2018), and therefore may continue to use the business standard mileage rate.