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How Should a Charity Reimburse a Volunteer for Mileage

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  • 06-03-2016, 01:03 PM
    speedy
    How Should a Charity Reimburse a Volunteer for Mileage
    I have a question related to what rate to reimburse a volunteer who used their personal vehicle for a trip to take some of the youth group on a retreat. The mileage was close to 500 miles. They preferred reimbursement rather than claiming it as an itemized deduction on their tax return.

    From what I have found, I believe it should be $.14 per mile, same as if they were not being reimbursed and only claiming it on their tax return. A few board members disagreed with me (believing it should be $.54 because of the wear on the vehicle, etc) and one asked a CPA. The CPA's response is below. I agree with a lot of what they say, except that it doesn't matter if they are a volunteer or an employee (then what would be the point of the IRS breaking out rates for charity vs employee??).

    Questions from other board member (he used $.17 because I accidentally said $.17 at the last board meeting):

    I have a question for our church.

    The IRS allows $.17 a mile deduction for volunteer work and $.54 a mile for employee driving reimbursement.

    If a volunteer drives their personal vehicle to a camp, training, or other function, how much can the church pay them in reimbursement?

    If an employee of the church drives their personal vehicle to a camp, training, or other function, how much can the church pay them in reimbursement?

    Response from CPA:

    The 17 cents a mile is what you can take as an itemized deduction if paid nothing for volunteer driving. However, the church is certainly allowed to pay 54 cents per mile to anyone who has driven legitimate church business miles. In other words, if the church wants someone to drive themselves or others somewhere on church business (attend conference on behalf of the church, take youth to function, etc), that mileage can be reimbursed at 54 cents per mile. It is not taxable income to the recipient – merely reimbursed business miles. There is no difference whether it is an employee or not. The key is it is recognized business miles requested by the church in its mission to carry out church business. If there is NO reimbursement, then the non employee taxpayer is limited to 17 cents per mile deduction on their federal return, and NO deduction on Pa/local. If NO reimbursement, the employee is entitled to take 54 cents per mile as an employee business expense, but in reality there would end up being no deduction federally – because off the 2% floor limitation, and a very small benefit on PA and local. I always suggest that the church pay out the maximum federal rate on business mileage, if possible. The driver can then donate a portion back if desired. If it is legitimate church business function, then why should the person – who is already donating their time – also be asked to bear the vehicle costs? Likewise – I absolutely advocate that employees should ALWAYS be reimbursed at the federal rate. It seems unfair to me to expect an employee to use their net paycheck to run around doing church business – visitation, getting church supplies, traveling to church functions like conferences, etc.

    Thank you to all who provide advice.

    Also...if we would reimburse more than $.14, the amount exceeding $.14 should all be counted as taxable income? Is the Correct?
  • 06-03-2016, 02:06 PM
    adjusterjack
    Re: Reimbursing Charity Miles Driven
    Quote:

    Also...if we would reimburse more than $.14, the amount exceeding $.14 should all be counted as taxable income? Is the Correct?
    No.

    The CPA wrote that the .54 reimbursement is not taxable income and neither is the .14 or whatever.

    Quote:

    Thank you to all who provide advice.
    Here's my advice.

    Pay the .54, or at least a lot more than the cheap .14 that you want to pay, otherwise expect little or no further volunteering.

    The $270 that you pay the member who drove 500 miles for the church is a fraction of what it would have cost the church to rent a vehicle for the trip.

    Use a little common sense and don't stiff people that do you favors.
  • 06-03-2016, 02:23 PM
    speedy
    Re: Reimbursing Charity Miles Driven
    I'm fine with paying whatever it should be...the problem is I don't know what the amount should be. I asked because I read that anything above $.14 is certainly allowed, but it should be considered taxable income.
  • 06-03-2016, 02:29 PM
    adjusterjack
    Re: Reimbursing Charity Miles Driven
    According to what the CPA wrote, it's not.

    However, there is a tax attorney who participates here. Stick around and see if he posts a comment.
  • 06-03-2016, 02:29 PM
    Taxing Matters
    Re: Reimbursing Charity Miles Driven
    Understand that the church may reimburse/pay the volunteer whatever amount it deems prudent to pay for the costs. There is no law that tells the church what it must pay or that restricts or caps the pay to some specific amount.

    The only real issue here is the tax effect of the reimbursement. To the extent that the church is simply reimbursing the volunteer for the actual cost the volunteer incurs carrying out church business I agree that is not taxable income to the volunteer, assuming that the church makes the employee account to the church for those costs. The employee would get no deduction on his federal income tax return for any costs that are covered by the reimbursement. Payment of expenses that are either not accounted for to the church or that are in excess of actual costs would result in taxable income to the volunteer. I'm inclined to agree with the CPA that the church may reimburse the 54 cents per mile in lieu of reimbursing actual expenses and the employee would not have taxable income from that, assuming the volunteer accounts to the church for the miles driven.
  • 06-03-2016, 02:40 PM
    speedy
    Re: Reimbursing Charity Miles Driven
    Quote:

    Quoting adjusterjack
    View Post
    According to what the CPA wrote, it's not.

    However, there is a tax attorney who participates here. Stick around and see if he posts a comment.

    That's what that CPA said, I asked three CPA's and they all said they felt anything over .14 should be taxable...I didn't want to make it a one sided argument...thats why i left that out..
  • 06-03-2016, 02:54 PM
    adjusterjack
    Re: Reimbursing Charity Miles Driven
    Quote:

    Quoting speedy
    View Post
    That's what that CPA said, I asked three CPA's and they all said they felt anything over .14 should be taxable...I didn't want to make it a one sided argument...thats why i left that out..

    "Taxing Matters" is the tax attorney I mentioned earlier. You can take his comment as gospel and print it out for your colleagues.
  • 06-03-2016, 04:06 PM
    flyingron
    Re: Reimbursing Charity Miles Driven
    Nothing in the code says anything about any reimbursment over 14 cents being taxable. Again, 14 cents is the statutory rate that you may deduct if you're not otherwise reimbursed. Even then you have the right to deduct the ACTUAL costs.

    As you've been told by YOUR CPA and by attorney TaxingMatters, that the reimbursement provided by the church is NEITHER subject to the 14 cent cap on payout NOR is any of it taxable to the volunteer.
  • 06-03-2016, 06:10 PM
    speedy
    Re: Reimbursing Charity Miles Driven
    Quote:

    Quoting flyingron
    View Post
    Nothing in the code says anything about any reimbursment over 14 cents being taxable. Again, 14 cents is the statutory rate that you may deduct if you're not otherwise reimbursed. Even then you have the right to deduct the ACTUAL costs.

    As you've been told by YOUR CPA and by attorney TaxingMatters, that the reimbursement provided by the church is NEITHER subject to the 14 cent cap on payout NOR is any of it taxable to the volunteer.

    Pub 463(2015): https://www.irs.gov/publications/p463/ch06.html

    Per diem or mileage allowance exceeds the federal rate: Adequate accounting up to the federal rate only and excess not returned. The excess amount as wages in box 1. The amount up to the federal rate is reported only under code L in box 12 of Form W-2 — it is not reported in box 1. All expenses (and reimbursements reported under code L in box 12 of Form W-2) only if expenses in excess of the federal rate are claimed. Otherwise, form is not filed.

    That's for employees, I think the excess would be the same for volunteers.

    Example 3.

    Debbie drives 10,000 miles in 2015 for business. Under her employer's accountable plan, she gets reimbursed 60 cents a mile, which is more than the standard mileage rate. Her total reimbursement is $6,000.

    Debbie's employer must include the reimbursement amount up to the standard mileage rate, $5,750 (10,000 × 57.5 cents), under code L in box 12 of her Form W-2. That amount is not taxable. Her employer must also include $250 ($6,000 − $5,750) in box 1 of her Form W-2. This is the reimbursement that is more than the standard mileage rate.

    If Debbie's expenses are equal to or less than the standard mileage rate, she would not complete Form 2106. If her expenses are more than the standard mileage rate, she would complete Form 2106 and report her total expenses and reimbursement (shown under code L in box 12 of her Form W-2). She would then claim the excess expenses as an itemized deduction.
  • 06-03-2016, 07:10 PM
    jdbofky
    Re: Reimbursing Charity Miles Driven
    .14 cents is PURELY what the IRS allows an individual to deduct on Schedule A of their tax return as a charitable contribution. It is NOT designed to be an amount that compensates fully for the cost of operating a vehicle. That is what the .54 cents per mile is designed to do. Therefore, if you reimburse based on the actual cost of operating the vehicle (.54 times the accountable mileage) then there would be nothing to report as income. .14 cents covers gas/fuel, but not insurance, maintenance, tires, depreciation, etc. all of which make up the cost of operating the vehicle. You can reimburse any amount you like without it being income IF the amount reimbursed is the actual cost of operating the vehicle OR is deemed to be so by the IRS (i.e. the .54 cents per mile).
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