any idea about Auto Allowance ? my dad advice me about this one…Your personal use of the vehicle has *always* been taxable. Your employer apparently thought it wasn’t and got audited. If you don’t suddenly get hit with a tax bill for earlier years, you are lucky. As for taxes, on a non-accountable plan, the total goes through your W-2. It’s subject to fica/mc as well as your marginal tax rate. If your employer gives you a separate check, they typically use a default tax rate of 25% for federal…and with state taxes, this adds up to 40%. When you file your taxes if none of these miles are for business and you end up *not* being in the 25% tax bracket, the excess tax will be refunded to you. (That is, if you are ultimately in the 15% bracket, that $250/month will be $37.50 extra tax and a $25 refund.) You have to take the IRS rate of 58.5 cents per mile for all miles you are claiming. Then you have to subtract out the 22 cents you already were reimbursed. Then you have to subtract out the $500 monthly allowance you are given. IF you have anything left over, it is a itemized deduction that must exceed 2% of your AGI. So unless you are claiming well over 20,000 mile…you get nothing back.If they are following IRS rules properly, they should be taxing the $500 per month, and not the 22 cents/mi reibursement. If they do not include the $500/mo in your taxable income, you would need to include that with the 22 cents/mi reimbursed on your form 2106.In any case you should have mileage records to document your business miles (commuting or personal miles are not deductible), fill out form 2106 including reimbursements, and after 2% of your AGI is deducted from that, you would need enough deductions on Schedule A to itemize.
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