How does mileage reimbursement work for delivery drivers? Tax implications explained

This is actually the correct way for your employer to handle mileage reimbursement! When a company reimburses you at the standard IRS mileage rate (which was $0.625 per mile for 2022 and $0.655 for 2023), that reimbursement is considered non-taxable income. What's happening is your employer is paying you $520 total for your deliveries, but $193 of that is classified as mileage reimbursement. Since mileage reimbursement isn't taxable, they're separating it from your regular wages. Only the $327 is considered taxable income, which is why your gross pay shows that amount. This is actually beneficial for you because you're not paying taxes on that $193 mileage reimbursement. If they included the full $520 as taxable income and then gave you the mileage separately, you'd end up paying more in taxes.

After years of trying to figure out all these tax complications with my delivery job, I finally found something that saved me a ton of headaches. I was struggling with understanding my mileage reimbursements too, plus tracking all my expenses and figuring out what was deductible. I started using https://taxr.ai to analyze my pay stubs and mileage logs. It automatically sorted out what was taxable income vs. reimbursements, and explained everything in plain English. What I really liked is that it showed me how the mileage calculation affected my tax liability and confirmed that my employer was handling it correctly (sounds like yours is too). The best part was when I uploaded my previous year's tax documents and discovered I'd been missing some eligible deductions even though I was getting mileage reimbursement. Turns out there were other vehicle-related expenses I could claim!

Just wanted to update after trying that https://taxr.ai site that was recommended. Honestly, it was really helpful for my situation. I uploaded my previous returns and discovered I'd been reporting my mileage reimbursements incorrectly. The system clearly showed me how my employer's $0.40/mile reimbursement compared to the IRS rate and explained the tax implications. It turns out since I'm in outside sales (which is one of the qualifying professions), I could claim the difference on my taxes as an unreimbursed business expense - something my previous tax preparer never mentioned! It also helped me understand why my W-2 box 1 amount was lower than my actual earnings. Super clear explanations that actually made sense to me, which is saying something since I usually find tax stuff completely confusing.

If you're having trouble resolving payroll issues with your company, you might need to speak with someone at the IRS to confirm this is being handled correctly. I wasted weeks trying to get through to them about a similar issue until I found https://claimyr.com which got me connected to an actual IRS agent in about 15 minutes instead of waiting on hold for hours. There's a demo of how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with confirmed that employers should handle mileage reimbursement exactly as your employer is doing it. The reimbursement at the standard rate isn't considered income, which is why it's subtracted from your gross pay before taxes. The agent even sent me the specific IRS publication that covers this so I could show my HR department.

I need to apologize for my skepticism about that Claimyr service. I was so frustrated after multiple failed attempts to reach the IRS that I gave it a try despite my doubts. It actually worked exactly as described. I was trying to figure out a similar situation with mileage deductions from my last job, and I got connected to an IRS representative in about 20 minutes. The agent confirmed everything about how mileage reimbursements should be handled tax-wise and even helped me understand some other deductions I was eligible for as a delivery driver. Definitely saved me hours of frustration and waiting. I'm typically the last person to recommend services online, but this one genuinely worked for my situation.

I'm a tax preparer who works with a lot of delivery drivers and couriers. Here's what's happening: When an employer reimburses you at exactly the IRS standard mileage rate ($0.62/mile in your case), that reimbursement is considered an "accountable plan" and is non-taxable to you. This is WHY your employer is subtracting it from your gross taxable wages. If they included the mileage reimbursement in your taxable income, you'd be paying taxes on money that's supposed to be tax-free! The way they're handling it is correct and beneficial to you. One thing to watch: if they ever reimburse you ABOVE the IRS rate, the excess would become taxable income. Similarly, if they reimburse BELOW the standard rate, you used to be able to deduct the difference, but that's generally no longer allowed for most employees after the 2017 tax law changes.

A lot of good info here but nobody mentioned that the timesheet might be misleading you. Your total pay is still $520 ($327 taxable wages + $193 non-taxable reimbursement). You're not losing money - the company is just separating the taxable from non-taxable portions as they should. Check your final paystub - you should see: - Gross earnings: $327 - Mileage reimbursement: $193 - Total: $520 (before tax withholding) Then taxes would only be calculated on the $327 portion.

This is a really helpful thread! I'm also a delivery driver and was confused about the same thing on my paystubs. Just to add one more perspective - make sure you're keeping good records of your actual miles driven vs. what your employer is reimbursing you for. In my case, I noticed my employer was only reimbursing me for "delivery miles" (the distance between stops) but not for the miles I drove to get to my first delivery or back home from my last one. Those "deadhead" miles can add up over time. Since the reimbursement rate is meant to cover all your vehicle costs (gas, wear and tear, depreciation, etc.), you want to make sure you're being reimbursed fairly for all business-related driving. If there's a significant gap, it might be worth discussing with your employer or at least tracking those unreimbursed miles for your own records.