One size doesn’t fit all for mileage reimbursement
Flat car allowances are a simple reimbursement option. Unfortunately, they’re also flawed. Without accurate mileage tracking, a car allowance is considered additional income. That means it’s not an accountable plan and can cost both your company and employees significant dollars in tax waste. Your organization pays more, and your employees get less.
Motus offers an alternative.
An Accountable Allowance program reduces company tax waste associated with FICA and income taxes. That also means increased take home reimbursements for your mobile employees. Motus maximizes the tax-free benefit with minimal effort on your part.
Or consider leveraging tax-free individual mileage reimbursements.
Flat car allowances are a one-size-fits-all approach. If you have employees located in different geographic regions, their costs of driving for business can vary drastically. So the one-size-fits-all approach? It’s not helping them out.
Take for example car insurance premiums. In Baltimore, premiums are much less expensive than in Detroit. The average annual premium in Baltimore is roughly $2,423 and average annual premium in Detroit is $7,415. Your employee in Detroit is getting reimbursed far less than what they’re paying just to insure their vehicle. Meanwhile, your employee in Baltimore is enjoying the payment intended for business driving as extra compensation. The result? Unproductive employee behavior and mileage reimbursements that aren’t fair or accurate.
Individual mileage reimbursements provide your mobile employees with payments based on exactly where and how much they drive for business. From your perspective, it’s a no brainer. They reduce mileage reimbursement costs, eliminate tax liability, and increase employees’ productivity in the field. For your employees, it’s also a win. Their cost of driving for business is fully reimbursed and they rest assured knowing there’s no W2 reporting involved or federal, state or local tax withholding.