With the new Tax Cuts & Jobs Act in effect for 2018 employees will no longer be allowed to deduct unreimbursed employee business expenses.
So, what does this mean and how does it impact employees going forward? We’ll explain.
Outside of minimum wage laws, there is no federal law requiring employers to reimburse employees that use their personal vehicle for business purposes, though most employers have opted to reimburse for these expenses.
If in the past, as a W2 employee, you may have been required to travel offsite to attend an event such as a sales meeting or a convention. If you had opted to use your own vehicle to travel to-and-from the event, you could reasonably expect that your employer would reimburse your mileage if a reimbursement policy was in place at your company, or worst case, you could write off the expense at years end at the current IRS standard mileage rate of $0.545 per mile.
As of 2018, these unreimbursed expenses are no longer possible.
For 2018 mileage or any other business expense, such as meals & entertainment, parking, tolls, fuel or even hotels that were not reimbursed by your employer are not allowed to be deducted on your federal taxes.
If you weren’t reimbursed for these expenses you can’t itemize them come tax time!
Since you know that you can’t deduct unreimbursed mileage or expenses starting in 2018 that will only leave you with one option, and it’s an option that isn’t even required by law – employee reimbursement.
Can Employers Refuse Reimbursement?
Absolutely! If the employer has an expense plan in place and your expense in question falls outside an ordinary or typical expense the employer can deny your reimbursement claim.
There are laws in place to protect employees, however, they’re there to protect them from expenses that are deemed ordinary, necessary & typical.
As an example.
If your employer has an expense plan in place and it allows for reimbursement of travel or accommodations there will likely be a limit to how much you can spend.
If you were to choose to fly first class to your destination, instead of flying coach, the employer would have no responsibility to reimburse your for the cost above their limit for airfare, assuming a limit is in place, and if there isn’t a specific price limit in place the employer can still refuse to pay the extra cost.
This quote from the DSLE sums it up.
California Division of Labor Standards Enforcement (“DLSE”) has said the employer may impose reasonable limits on employee expenses.
Essentially, this reasons that even if there’s no limit listed, a limit can be used and you employer has the right to determine these limits.
What Can I Do If My Employer Doesn’t Reimburse My Expenses?
This article isn’t meant to be a scare tactic. Chances are this new change may not even affect you. Instead, it’s more likely to impact employees whose employer has a history of not reimbursing personal vehicle use for business purposes.
If your employer has an employee reimbursement policy in place right now, there’s a high likelihood that no further changes will be made and you will continue to be reimbursed as agreed.
Though it should be stated that in 2 states, South Carolina & North Carolina, there is no mandate for employers to reimburse employees, so it’s a double-whammy for those residents if the employer elects not to pay to reimburse for mileage reimbursement.
The Tax Cuts & Jobs Act has changed the way employees can deduct or itemize unreimbursed expenses. The downside is that if you were not reimbursed by an employer then you cannot deduct these items on your taxes. The upside is that your minimum standard deduction has almost doubled from $6,350 to $12,000 for a single tax filer giving you a large “blanket” deduction to use in lieu of itemized deductions that you may have taken in years past.
The good news is that there is typically a employee reimbursement process in place for expenses paid for or incurred by the employee during the course of business, even if federal law doesn’t mandate such a plan.
For those of you that do get reimbursed by your employer, you need to track accurately and efficiently. Right now there’s no better way to do this than by using Everlance is the #1 rated mileage & expense tracker
Everlance automatically tracks mileage silently in the background while you drive. Any previous trips can be manually entered at any time.
For expenses you can elect to manually add any expense such as hotels, parking, meals, entertainment, or automatically track them by by linking your company credit card or bank account.
If you’re required by your employer to retain receipts you can simply take a picture of the receipt with your smartphone and store a copy in the cloud forever (or as long as you need it) – there are no limitations to how long, or how many receipts you can store.
When you’re done with your trip and it’s time to turn in your expense report you can export your data into one easy-to-read report and hand it off to accounting.
Best of all, you can download Everlance for free and try all of the features of Everlance Premium for 7 days. After 7 days you can continue using Everlance free for as long as you want, but you’ll have to upgrade to Everlance Premium ($8/mo or $60/yr) to retain all of the premium features.
For those of you that own businesses and would like an easier way to track employee mileage and expenses, we have Everlance Teams that has all of our premium features plus a dashboard, employee account management and simplified billing for as many employees as you’d like.