In the United States, reimbursement-related regulations have significant variations depending on the region. Illinois is unique in this regard, as a dedicated mileage reimbursement rule is baked into its legislation. Employers in the Prairie State must provide employees with accurate reimbursements for expenses incurred during business-related activities. There are several programs available to streamline this process, such as Fixed and Variable Rate (FAVR) reimbursements, Tax-Free Car Allowances (TFCAs), and Cents per Mile (CPM) arrangements.
In this article, we will answer fundamental questions, including: what are the rules for mileage reimbursement in Illinois? What is the Illinois mileage reimbursement rate for 2023? More broadly, we will explore the intricacies of the state’s mileage requirements and show how mobile workers and their employers can get the most out of a reimbursement program while complying with tax regulations and legal requisites.
Do you have to reimburse for mileage in Illinois?
The answer is a resounding yes – Illinois is among the select few states that mandate mileage reimbursement for employees, as we shall see later in our discussion of labor laws later in the article. Alongside Massachusetts and California, Illinois recognizes the importance of providing fair reimbursement for business-related excursions. The state’s mileage reimbursement rule serves as a crucial reimbursement for employees, acknowledging the costs they may encounter when using their own vehicles to fulfill job-related duties.
What is the Illinois mileage reimbursement rate in 2023?
The Internal Revenue Service (IRS) governs mileage reimbursements across the United States, and, as of 2023, the federal standard mileage rates for the business use of personal vehicles are 65.5 cents per mile. In Illinois, however, there is no specific state-governed rate – as a result, privately owned companies in the Prairie State have quite a bit of leeway in determining their mileage reimbursement rates while nevertheless accounting for factors such as industry standards, cost of living, and internal company policies.
To ensure transparency, employers should communicate their mileage reimbursement policies to employees. This includes outlining the reimbursement rate per mile, any specific requirements for documentation or reporting, and the frequency of reimbursements.
At the same time, some branches of state government employees may have a rate going for the driving duties their position specifically requires; these rates vary depending on the organization and the nature of the work being performed. According to the Legislative Travel Control Board of Illinois, provisions of this nature exist within:
- The General Assembly
- Legislative Boards and Commissions
- The Office of the Auditor General
- all legislative agencies.
Illinois average mileage reimbursement rates
Illinois average mileage reimbursement rates tend to be slightly higher than the national average of $600; this disparity can be attributed to various factors specific to the state. Illinois being slightly above average is typical of the Midwest.
- Industry: With a diverse range of industries, including finance, manufacturing, technology research and development, and healthcare, Illinois boasts a robust economic presence, which translates into higher wages and overall higher costs of living compared to other regions. Given the state’s various employment opportunities, a great deal of business-use driving is necessitated.
- Urbanization: The state also has several densely populated cities, including Chicago and Springfield, significant business and transportation hubs. Bustling urban environments and increased traffic congestion and parking expenses may lead to higher mileage reimbursement rates to offset the additional costs associated with operating vehicles in these areas.
- Infrastructure: Another factor contributing to Illinois’s slightly higher mileage reimbursement rates could be the state’s extensive highway system and transportation infrastructure, which connects various cities and facilitates innumerable business activities. The frequent use of vehicles for professional purposes, alongside wear and tear on vehicles, may prompt employers to provide higher reimbursement rates to account for the increased mileage and potential maintenance costs.
Illinois mileage reimbursement tax laws
Under IRS guidelines, employers can reimburse employees for their business-related expenses using either the standard mileage rate or the actual expenses method. The standard mileage rate is a fixed rate per mile driven for business purposes. At the same time, the actual expenses method involves reimbursing employees for the costs incurred, such as gas, maintenance, and depreciation. For employees who receive mileage reimbursements, keeping accurate records of their business-related mileage and any related expenses is crucial. These records serve as documentation for tax purposes and help ensure compliance with IRS regulations.
As the Illinois General Assembly has noted in the Illinois Compiled Statutes (ILCS), specific stipulations must be met for a reimbursement to be considered valid. Section 9.5, “Reimbursement of employee expenses,” discusses the nature of “necessary expenditures,” or the types of costs deemed worthy of reimbursement. In this context, “an employer is not responsible for losses due to an employee’s negligence, losses due to normal wear, or losses due to theft unless the theft was the result of the employer’s negligence.” Supporting documentation must be provided within 30 calendar days after the expense. Employees, the statute notes, must comply with specific company reimbursement policies. Otherwise, the legality of the allowance is avoided.
Illinois labor laws: championing mileage reimbursements
What is the Illinois state law on mileage for jobs? As per the amendments made in April 2023, labor laws in Illinois are very protective of workers’ access to reimbursement, especially concerning vehicle expense reimbursement. According to Section 300.540 of the Illinois Register, reimbursements must be doled out so long as the criteria of business use of a vehicle are met – this includes any work undertaken with a personal car that is of “Primary Benefit to the Employer.” Five items must be considered when determining whether something is of “primary benefit to the employer”:
1. Whether the employee has any expectations of reimbursement;
2. Whether the expense is required or necessary to perform the employee’s job duties;
3. Whether the employer is receiving a value that it would otherwise need to pay for;
4. How long the employer has been receiving the benefit; and
5. Whether the expense is required for the job.
Consequently, if a business fails to payout total reimbursements for vehicle usage, they are on the hook:
“If an employer has informed an employee that they are not entitled to seek reimbursement or has failed to respond to an employee’s request for reimbursement, that shall be considered a denial of reimbursement, and the employee may file a claim against the employer with the Department seeking reimbursement for expenses.”
Scenarios in which reimbursements are refused can lead to severe consequences; a company may be subject to not only labor-related complaints but full-on lawsuits. These amendments, moreover, authorize the Illinois Department of Labor (IDOL) to impose fines on employers that are significantly higher than previous penalties – a successful claim for a failure to reimburse requires companies to pay the full reimbursement amount and an additional penalty of 5% of the reimbursement, multiplied by the number of months between the time the initial payment should have been made and when it was made. Before the amendments, the penalty was 2% of the reimbursement amount.
Throughout this article, we have explored the intricate nuances of Illinois mileage requirements, aiming to equip mobile workers and their employers with the knowledge and insights needed to maximize the benefits of a comprehensive reimbursement program. Illinois is unique regarding mileage reimbursement protections for mobile employees. While these protections can complicate things for employers who manage a team of drivers, getting a workforce the reimbursement it deserves will bring a more sustainable sense of success and company-wide prosperity. The bottom line is that employees love great reimbursement programs.
Disclaimer: Nothing in this blog post is legal, accounting, or insurance advice. Consult your lawyer, accountant, or insurance agent, and do not rely on the information contained herein for any business or personal financial or legal decision-making. While we strive to be as reliable as possible, we are neither lawyers nor accountants or agents. For several citations of IRS publications on which we base our blog content ideas, please always consult this article: https://www.cardata.co/blog/irs-rules-for-mileage-reimbursements. For Cardata’s terms of service, go here: https://www.cardata.co/terms.