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It depends on the status of the plan she is reimbursed from, specifically whether or not the plan is considered an accountable plan. Your employer may reimburse you for using your car at work, but, if the payments aren’t made pursuant to an accountable plan, your employer has to include them on your W-2. As a result, the reimbursements will be reported on your tax return in the same way as your wages.
To be an accountable plan, the employer's reimbursement or allowance arrangement must include all of the following rules:
Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer.
You must adequately account to your employer for these expenses within a reasonable period of time.
You must return any excess reimbursement or allowance within a reasonable period of time.
It depends on the status of the plan she is reimbursed from, specifically whether or not the plan is considered an accountable plan. Your employer may reimburse you for using your car at work, but, if the payments aren’t made pursuant to an accountable plan, your employer has to include them on your W-2. As a result, the reimbursements will be reported on your tax return in the same way as your wages.
To be an accountable plan, the employer's reimbursement or allowance arrangement must include all of the following rules:
Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer.
You must adequately account to your employer for these expenses within a reasonable period of time.
You must return any excess reimbursement or allowance within a reasonable period of time.
Generally, if your wife submitted her mileage to her employer and the employer "reimbursed" her based on those specific miles, it is a tax-free arrangement (an "Accountable Plan").
If the employer did not do that (such as giving her a flat amount or some other method not based on mileage that she submitted), it is taxable wages. Her employer should have included that on her W-2.
So either way, you don't need to do anything when preparing your taxes to report that income.
In the event it was NOT an "Accountable Plan" (it was taxable and added to her W-2) or if the Accountable Plan reimbursement was less the IRS maximum, you MIGHT be able to get a deduction for that expense. It is no longer deductible on the Federal return, but some States still allow it as a deduction (but it is usually subject to limitations, so it still may not benefit you).
Both AmeliesUncle and DawnCO are correct. To summarize:
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