Both of the following methods require expense reports from the employee.(Accountable Plan).
Actual expense reimbursement is not taxable to the employee if you follow your accountable plan and if employees return excess payments within a reasonable time. If the amount of the reimbursement is more than the IRS standard mileage rate for the year, the excess amount is taxable to the employee.
A mileage allowance up to the federal mileage rate is not taxable to the employee if you follow your accountable plan. The employee must pay tax on any payments over the IRS standard mileage limit and on any excess payments they don’t return.
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