QuickBooks Training Post:

It’s common to need someone in the company to run errands for the business. When that task is given to an employee, using their own vehicle, we often need to reimburse them for the miles they’ve driven.

If you do payroll in QuickBooks, this is something you can easily add on to a payroll check without affecting wages and other payroll forms. They key, as usual, is in correct setup.

In order to accomplish this, we need to setup a payroll item to add the amount to the employee’s check. Navigate to Lists->Payroll Item List.

Right-click your mouse on the list, or click the Payroll Item button in the lower left portion of the window. From the resulting menu, select New.

In the first setup screen, choosing Custom Setup will allow more flexibility in creating our new payroll item.

The correct payroll item type is Addition. We want to add a reimbursement to an employee’s check.

The next screen asks us to name the item. Mileage Reimbursement would work.

QuickBooks will suggest Payroll Expenses as the expense account for posting the paycheck deductions. It’s not a good idea to use that account since that is where wages are posted. Having an expense account for wages only makes for an easy way to double check accuracy of this expense periodically.

In the screenshot, we’ve used a subaccount of Auto Expense named Mileage Reimbursements.

The next step in the setup process is critical. QuickBooks will ask for the Tax Tracking type of our new item.

Unfortunately, the default is Compensation. Leaving the default will result in QuickBooks treating the reimbursements as wages. The amounts will be subject to all the same payroll taxes and withholdings as any other wage item.

The amounts will be included in wage totals for payroll tax returns. They will be included on W2s as employees’ taxable wages.

Above we have corrected the default and chosen None as the tax tracking type. This is correct.

Clicking Next will present us with a list that shows what taxes are affected by this item. None are affected. There should be no reason to make an entry on that screen.

There are a couple of options in the screen above. In our case, we want to base this item on quantity. When we use it, the amount will depend on the quantity of miles, so make that selection.

We want to calculate based on net pay, not gross. QuickBooks won’t calculate this particular item based on pay, but it should be added to the net paycheck, not the gross.

Set the default rate since it will be the same for everyone. The IRS mileage rate for business miles in 2015 is .575 per mile.

Click Finish and your Mileage Reimbursement item is complete. Later, we will add it to a payroll check to reimburse one of Rack Castle’s employees.

Hector Garcia, CPA
Certified Advanced QuickBooks ProAdvisor
12401 Orange Drive #136
Davie, FL 33330
954-414-1524
hector@garciacpa.com

The post Reimbursing Employees for Mileage Expense appeared first on QuickBooks Training & QuickBooks Consulting. Best rated in Miami & Broward.

Source: Hector\’s QuickBooks Blog

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