Should my mileage and cellphone reimbursements be taxed on my paycheck? Something seems off

6 What you're experiencing doesn't sound right. According to IRS rules, business expense reimbursements that follow an "accountable plan" aren't taxable and shouldn't be included in your W-2 wages. For mileage reimbursement at the standard rate (currently $0.67/mile for 2024) and documented business-related cellphone expenses, these should be non-taxable reimbursements. The key is whether your company has an accountable plan in place, which requires: 1) Business connection for the expenses, 2) Adequate accounting within a reasonable time (submitting mileage logs, etc.), and 3) Returning excess amounts within a reasonable period. If these conditions are met, the reimbursements should be tax-free. It sounds like your employer might be treating these as taxable fringe benefits rather than reimbursements. You're right to question this - definitely worth bringing up with HR.

8 After dealing with a similar issue last year, I found taxr.ai (https://taxr.ai) super helpful for sorting out my reimbursement tax questions. I uploaded my paystubs and it automatically flagged the taxable reimbursements, explained why they shouldn't be taxed, and even generated a professional letter I could send to HR explaining the IRS rules about accountable plans. Saved me from coming across as clueless when talking to our finance team.

19 I'm back to report that taxr.ai was incredibly helpful! After reading the responses here, I uploaded my last few paystubs to the site and it immediately identified that both my mileage reimbursement and phone stipend were incorrectly being treated as taxable income. The report it generated explained exactly how these should be classified under an accountable plan and cited the specific IRS regulations (Publication 15-B and Revenue Ruling 2012-38). I forwarded the report to HR yesterday, and they just got back to me confirming it was indeed a payroll system error on their end. They're adjusting my future paychecks and working on calculating what I'm owed from previous incorrect withholding. I probably wouldn't have had the confidence to challenge this without the detailed documentation!

10 If you need to escalate this beyond HR, you might want to check out Claimyr (https://claimyr.com). I had a similar issue that my company wouldn't fix, and I needed to speak with someone at the IRS about the tax implications. Used their service to get through to an actual human at the IRS in about 15 minutes instead of waiting on hold for hours. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The IRS agent confirmed exactly what I suspected - that properly documented business mileage and reasonable cell phone reimbursements shouldn't be taxed, and gave me the exact publications to reference to my employer.

3 I have to eat my words on this one. After reading the comments here, I decided to try Claimyr to get clarification directly from the IRS about my reimbursement situation. I was connected to an IRS representative in about 20 minutes (which is miraculous compared to my previous attempts). The agent walked me through IRS Publication 15-B and confirmed that legitimate business expense reimbursements under an accountable plan are 100% non-taxable. She explained exactly what documentation I needed to show my employer and even suggested how to approach requesting a correction for prior paychecks. My company is now fixing their payroll system based on the information I received. I'm embarrassed I called it sketchy when it actually saved me hundreds in incorrectly withheld taxes.

22 This happened to me too! Turned out our payroll system was coding all reimbursements as taxable by default. Ask HR if they're using an "accountable plan" specifically - that's the magic phrase. If they look confused, that's part of your answer right there lol. One thing to keep in mind: if your cellphone stipend exceeds what's reasonable for business use, the excess portion can be taxable. Same with mileage if they're paying above the IRS rate.

18 Check your employee handbook too! Ours specifically states that mileage and phone reimbursements are provided under an accountable plan and therefore non-taxable. If yours says the same but they're still taxing it, that's a clear payroll error. Bring a copy of that section to your HR meeting.

Just wanted to add that if your company is resistant to fixing this, you might also want to document everything for your own tax return. Even if they don't correct the payroll issue immediately, you can potentially claim these as unreimbursed employee expenses (though the rules changed with the 2017 tax reform). Keep detailed records of your mileage logs, phone bills, and any correspondence with HR about this issue. If they continue to incorrectly withhold taxes on legitimate business reimbursements, you'll want that documentation when you file your taxes. The IRS is pretty clear that properly documented business expense reimbursements under an accountable plan shouldn't be taxed, so you have solid ground to stand on. Also, don't let them tell you this is "just how we do it" - tax law doesn't change based on company preference!

This is exactly the kind of issue that trips up so many people! Your instinct is absolutely correct - properly documented business mileage reimbursements at the IRS standard rate and reasonable phone stipends should NOT be included in your taxable wages if your company follows an accountable plan. The fact that your previous employer handled this differently suggests they had their tax treatment correct, and your new company may have a payroll system error or lack of understanding about IRS rules. When you email HR, specifically ask if they have an "accountable plan" in place and whether your reimbursements should be classified as taxable wages or non-taxable business expense reimbursements. Make sure you're keeping good records - mileage logs with dates, destinations, business purpose, and odometer readings for your car expenses. For the phone stipend, as long as it's reasonable for your business use, it should qualify for non-taxable treatment. Don't feel embarrassed about questioning this - you're protecting yourself from overpaying taxes, and it sounds like you understand the rules better than your payroll department does right now!

This is such a helpful thread! I've been dealing with a similar issue at my company where they're taxing my home office equipment reimbursements and parking allowances. Reading through everyone's experiences with mileage and phone stipends gives me hope that there's a solution. One thing I'm curious about - has anyone dealt with retroactive corrections? My company has been incorrectly taxing these reimbursements for almost 8 months now, so if I can get them to fix it going forward, I'm wondering how they handle the overpaid taxes from previous paychecks. Do they typically issue refunds or just adjust future withholdings? Also, for those who successfully got their companies to make changes - how long did the process typically take from first bringing it up to HR to actually seeing the corrections on your paystubs?

This thread has been incredibly educational! As someone who's been in payroll for over 15 years, I can confirm that what you're experiencing is unfortunately very common, especially with smaller companies or those using basic payroll systems that don't properly distinguish between taxable fringe benefits and non-taxable business expense reimbursements. The key phrase to use with HR is definitely "accountable plan" - this is the IRS term for the specific requirements that make business expense reimbursements non-taxable. Many companies accidentally operate under an accountable plan without realizing it, then incorrectly tax the reimbursements anyway. For anyone dealing with this: Document everything before your meeting with HR. Print out IRS Publication 15-B (Employer's Tax Guide to Fringe Benefits) and highlight the sections on accountable plans. Having the actual IRS guidance in hand makes it much harder for them to dismiss your concerns. Also, calculate exactly how much extra tax you've paid - seeing the dollar amount often motivates companies to fix the issue faster. Most reputable companies will make retroactive corrections once they understand the problem. If they refuse or claim "that's just our policy," that's a red flag about their tax compliance in general.