How should gas reimbursements be reported?

August 22, 2011

From:  Lila
Date:  Mon, 20 Oct 2008

Dear Michael,

  1. If an employee is reimbursed for gas or paid a monthly amount towards gas, is it considered an employee benefit? Should it be reported on the payroll?
  2. If a person is paid as a subcontractor and also as an employee, how should it be handled?

Thanks,
Lila

Answer

Date:  4 Nov 2008

Hello Lila,

  1. If the employer has an "accountable plan" where the employee makes an expense report and any excess payment by the employer is refunded by the employee or only actual expenses are reimbursed (including auto expenses at the standard mileage rate – currently 58.5¢ per mile (after June 30, 2008), no amount needs to be included in payroll.

    If the payment is for a non-accountable plan, including a standard monthly allowance, the payment is treated as additional wages and included in payroll.
  2. I don't recommend trying to treat some services as wages and others as nonemployee subcontract services. Where does one end and the other begin?

    If the services are being performed at the employer's location or the employer otherwise exhibits signs of control, including dictating the working hours, providing tools and supplies, etc., the individual is probably an employee. Another indication the person is an employee is the individual only performs services for one "employer" instead of multiple "customers."

I would also recommend that an individual who is claiming to be a contract laborer should have a business license.

This is a very "hot" audit area with the tax authorities.

Good luck!


Mike Gray

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