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I BACK I Inexpensive Start-Up I Partner Services I |
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Why pay mileage reimbursements for volunteer drivers? This is a very good question that has been asked many times. It is true that most of us have very big and generous hearts. It is more than likely that we would agree to help a neighbor or a friend if they asked us for a ride to their doctor or the store. At least we would if the requests were occasional. It does seem, though, that the payment of mileage reimbursement functions to sort of cement the assistance relationship of the volunteer to the passenger for repeated and continual assistance. Partly, the volunteer comes to view the mileage reimbursement payment as recognition for the important service they are providing. Also, many volunteer drivers have little if any income over and above Social Security and paying the cost of gas is an important consideration. For the passenger, the ability to offer to contribute to the payment of gas expense makes it easier and more comfortable to initially ask a friend or neighbor to volunteer to assist with their transportation needs. As the relationship continues, because the passenger is helping to pay for the expense of travel, the passenger comes to feel that on-going transportation transactions are more of an equitable exchange. Are mileage reimbursement payments reportable as taxable income? We have been asked this question many times. Here is the answer:
Q: "As a government entity that volunteers to
drive senior citizens to various locations, the city gives the
volunteers mileage reimbursement at 0.35 cents per mile, under the
allowable IRS amount. Does the city require a W-9 to be on file for
each volunteer, and if they exceed the $600 amount, do they receive
a 1099-MISC. even if the mileage rate is less then the allowable
reimbursement rate set forth by the IRS?"
See
IRS Publication 463 for information on
travel expenses and reimbursements, and
Publication 535 on Business Expenses. What mileage reimbursement rate can be paid? As you may know, there has been an ongoing discussion about this, often punctuated with the opinions of folks who have tried to interpret IRS rules without asking the IRS for their explanation of the written rules. Our approach has been to ask the folks at the Tax Exempt and Government Entities Division of the Internal Revenue Service to clarify the intention of their regulations, on multiple occasions. In all instances, we have been referred to the IRS Publication on Business Expenses and told that the IRS makes no distinction between for profit business and not for profit business. Often people have confused the amount per mile that is allowed as a tax deduction for unpaid volunteer mileage with the rate of mileage reimbursement that is allowed to be paid. This is incorrect. The answer is: "The rate of mileage reimbursement cannot exceed the published IRS Standard Rate then in effect." This rate, applicable to for profit business mileage reimbursement and applicable to not for profit business mileage reimbursement, including to volunteer drivers, is subject to change by the IRS at least one time each year. Any amount paid over the IRS Standard Rate must be reported as income to the recipient and issuance of a 1099 would be required. How should we select a rate for mileage reimbursement payments? Any rate, up to the IRS standard rate then in effect, which changes every year, can be used to calculate and pay mileage reimbursements. Based on projections of a combination of estimated use and available resources for the current year, a rate that meets financial resource availability can be set. You may determine that you want to pay .25 per mile, or .32 per mile, or to change the rate in order to maximize service utilization in any period subject to resource constraints. The TRIP Program in Riverside has been paying at a .32 per mile rate for some time now but, for a period recently, the rate was changed to .25 per mile in order to maintain service to the maximum number of passengers possible while not exceeding the funding allocated for the period. Some TRIP services pay up to the maximum standard mileage reimbursement rate that is permitted by the IRS. TripTrakTM provides each service with the capability to establish the rate that is appropriate and necessary for their program operation, or to change that rate whenever necessary. We think it might take too much time to input trip and mileage data for our passengers. Can we pay a flat rate per trip stipend instead of mileage reimbursement? We are not comfortable with the "flat rate" stipend approach. Two things: 1. The time required for the TRIP Program in Riverside to input the trip and mileage data into TripTrakTM software, for our current 400 plus passenger load per month, is about 12 hours. A start-up TRIP Program can expect to build the user base of probably no more than 200 passengers during your first year of operation, unless everyone is eligible to receive service and unlimited resources are available. So, at max, a monthly data input requirement of maybe 6 to 8 hours could be expected. a. Data input could be done by paid staff or could be done by volunteers. b. Also, one huge advantage of implementing the TRIP model is that it is scaleable - outreach, if done through in-services and notices to your selected referral sources, can be pretty closely managed to only allow program and service growth that is in harmony with your human and financial resources. 2. We are not comfortable with the flat rate stipend approach as I do not think that it meets IRS requirements for a qualified reimbursement plan. I am not an attorney, so am not advising you one way or another on this, but will share with you what I have learned in my conversations with the IRS: In 2005 we talked with the IRS about issues surrounding mileage reimbursement of volunteer drivers. We were referred to the Tax Exempt and Government Entities Division of the Internal Revenue Service and we submitted a detailed letter to them to once again check on our understanding of IRS rules as they apply to the payment of mileage reimbursements to volunteers. An analyst from the TE/GE Division contacted us and told us that our program had correctly interpreted IRS rules, as they apply to the payment of mileage reimbursements, and that our documentation procedures were adequate to qualify our program as an “accountable plan”. At that time, we had informed the TE/GE Division that we were then reimbursing at the rate of 28 cents per mile. With regard to the qualification of a mileage reimbursement to be considered as non-taxable, we were directed to IRS Publication dealing with Travel, Entertainment, Gift, and Car Expenses), and this: “If you are an employer and you reimburse employee business expenses, how you treat this reimbursement on your employee’s W-2 depends in part on whether you have an accountable plan. Reimbursements treated as paid under an accountable plan are not reported as pay.” Further, “To be an accountable plan, your employer’s reimbursement or allowance arrangement must include all three of the following rules. 1. Your expenses must have a business connection. 2. You must adequately account for these expenses within a reasonable period of time. 3. You must return any excess reimbursement within a reasonable time.” From the IRS perspective, I was told, “employer” is any entity that organizes tasks for a purpose defined by its mission or business and an “employee” is an individual who does the work of the entity, and that these rules make no applicability distinction between organizations that are for-profit, non-profit, or government agencies, or, in the case of non-profits and government agencies, whether or not the person is paid or a volunteer. If a “flat rate” stipend approach is used: 1. How will you adequately account for the related mileage expense? 2. How will you determine if excess funds have been distributed or not properly used? And if you are able to do that, how will you be able to recover those funds? If you cannot, the appropriate remedy is to issue a 1099 for the excess funds received by the volunteer.
3. Recently we have been having
discussions with the Medi-Cal (Medicaid) folks. Their policy is
that funds that exactly reimburse people for actual costs are
reimbursements and not countable as income when determining
eligibility for Medicaid; however, any funds that are disbursed in
excess of actual expenses are countable as income for the Medicaid
recipient. What about using a “gas card” instead of sending a check to pay the mileage reimbursement? So long as the amount placed on the gas card is the exact amount of the verified mileage amount associated with a mileage reimbursement request, the method of paying the mileage reimbursement is irrelevant. If an amount is placed on the gas card that is unrelated to the actual mileage provided by a volunteer during a period, a method of accounting will need to be developed that meets the requirements of an IRS accountable plan. For example, if a card is issued in the amount of $100, somehow the actual mileage during the period must be reported by the volunteer in sufficient detail required by IRS rules, verified, and any excess over actual would need to be returned. One of the requirements of an IRS accountable plan is that there is an adequate accounting of the basis for the expense. In order to meet this requirement, the following support information will need to be provided: 1. The date of the travel 2. The location of the travel’s origination 3. The destination of the travel 4. The purpose of the trip 5. The mileage of the trip Similar details should be provided for the return trip and for all other trips that are reported to justify the request for mileage reimbursement. The excess could conceivably be carried over to the next period and accurately accounted for by the next mileage request or the next, and this process could continue until the excess on the card is completely used. However, accurately accounting for the ongoing use of mileage reimbursement funds advanced on the gas card may be administratively quite complicated. How are requests for mileage reimbursement received and processed by TRIP in Riverside? Mileage reimbursement request forms are sent to passengers. Both passengers and their volunteers are asked to always record travel on the day of the trip. To complete the form for each trip, the date must be written in, the reasons or purposes of the trip identified, the from and to cities, which are sometimes the same, and then the exact miles driven. Then the volunteer signs to certify that they provided the trip as stated and records the volunteer time that they contributed on that day. At the end of each month, the passenger, often with help from a volunteer, is required to review the full month's request and sign the request certifying that the travel took place as stated. Immediately the request forms are then mailed to TRIP. When received, requests are reviewed for errors and omissions. Sometimes a phone call is placed to the passenger to ask for clarifications of unclear requests. Sometimes they are returned for appropriate review and signatures. Trips for unauthorized purposes are eliminated from the requests. Then we run a machine tape on the miles that are being requested and the data on each request form is entered in TripTrakTM software. The software checks mileage requests against permitted mileage limits and does not schedule payment for mileage that exceeds established limits. When all data has been entered for all users for the month, scheduled payments are audited against submitted request forms and checks are issued. Mileage reimbursement checks are mailed to passengers with blank reimbursement request forms on the 25th day of each month following the month of reported travel. Checks are always mailed at the same time each month to eliminate inquiries about when checks will be issued. What method of payment of mileage reimbursements is suggested? The TRIP Program in Riverside makes mileage reimbursement payments to program passengers by check. Payments are made to passengers, instead of volunteer drivers, for two reasons: (1) passengers may, and often do, have multiple volunteer drivers and some also change volunteer drivers somewhat frequently - to pay volunteer drivers is more costly to the program; (2) making the payments to the passengers reinforces the idea that the passenger is a contributing partner to transportation transactions. Payment could also be made by direct deposit, but many of the passengers in the TRIP Program in Riverside are elderly or chronically ill and of very low income and do not have bank accounts. Offering direct deposit to those who can take advantage of the service might be a cost savings for some TRIP programs, but there could be other complications. One of the criteria for service provision by the TRIP Program in Riverside is that the recipient of service is resident of a particular area - checks can be sent "do not forward", but direct deposit will go to a person's account regardless of where they might live.
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The Beverly Foundation has rated TRIP as ........"the nation's best volunteer driver model" |
Mileage Reimbursement