If your employer paid you a fixed mileage allowance of up to 55.5 cents per mile for business miles driven in 2012, the amount of your driving costs is treated as substantiated under the accountable plan rules (20.32), provided you show the time, place, and business purpose of your travel. If the allowance is in the form of an advance, it must be given within a reasonable period before the anticipated travel and you must also be required to return within a reasonable period (20.32) any portion of the allowance that covers mileage that you have not substantiated.
If these tests are met, the allowance will not be reported as income on Form W-2, and you will not have to report the allowance or expenses on your return; see Example 1 below. If you do not prove to your employer the time, place, and purpose of your travel, the entire reimbursement is treated as paid from a non-accountable plan and will be reported as income on Form W-2.
Your employer may reimburse you for any parking fees and tolls in addition to the mileage allowance.
In lieu of setting the allowance at the IRS standard mileage rate, an employer may use a fixed and variable rate allowance, called a FAVR, that gives employees a cents-per-mile rate to cover gas and other operating costs, plus a flat amount to cover fixed costs such as depreciation or lease payments, insurance, and registration. A FAVR allowance must reflect local driving costs and allows employers to set reimbursements at a rate that more closely approximates employee expenses. If your employer sets up a qualifying FAVR under IRS guidelines, you will be required to provide records substantiating your mileage and certain car ownership information. Expenses up to the FAVR limits are deemed substantiated and will not be reported as wages on your Form W-2.
13.59.197.213