Employees who drive for work and the TCJA

FreeRepublic ^ | 30 Jan, 2018 | NonValueAdded

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The Tax Cuts and Jobs Act has done away with 2% miscellaneous deductions for taxpayers who itemize. This includes employees who drive for their job and are not reimbursed for the use of their personal vehicle or receive far less that the standard mileage rate of 55 cents a mile and recoup their costs through a hefty reduction in taxable income when they itemize their deductions.

Think drivers who deliver pizza, for example. If they don't live in a state (e.g. California) that requires employers to reimburse their employees for expenses incurred in the performance of their duties, they end up eating the cost and are subsidizing their employers. I suspect certain business models will experience shock waves when the reality of this hits home with their employees. Or when the unions grab hold of this as an organizing issue.

One school of thought is for employers to establish an accountable plan to reimburse employees, which makes the reimbursements nontaxable to the employee and deductible as a business expense for the employer.

An irony is that "independent" contractors who receive a 1099-Misc instead of a W-2 can continue to claim automobile expenses as a business expense on their Schedule C. This would include drivers for the new taxi paradigm (Lyft, Uber, etc.) The once dreaded 1099 which places both sides of the Payroll tax on the recipient might actually turn out to be a godsend in comparison to the employee driver stuck with subsidizing the boss.

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Pay close attention to the unions and the big three pizza purveyors. Those companies need to come to terms with the TCJA impact on their employees pronto, lest they find themselves in the gunsights of the Teamsters, SEIU, and the Amalgamated Meatcutters (had to throw that blast from the past in there), to name a few.