(A) In a word – yes! (As Shakespeare wrote – “brevity is the soul of wit.”)
To elaborate - As long as you submitted the actual miles driven for business to your employer on a regular basis and “he” reimbursed you under an “accountable plan” at a rate that does not exceed the IRS standard mileage allowance the reimbursement is tax-free and will not be included in taxable wages on your Form W-2. If the rate of reimbursement, in this case 16 cents per mile, is less than the federal standard mileage allowance, which was 44.5 cents per mile for 2006 and is 48.5 cents per mile for 2007, you can deduct the difference as an “employee business expense” on Form 2106. The net amount on Form 2106, in this case 16 cents per mile for 2006, is claimed as a “miscellaneous deduction” on Schedule A – subject to the 2% of AGI exclusion. The total amount of job, investment or tax-preparation related expenses must be reduced by 2% of your Adjusted Gross Income. If your total miscellaneous deductions are $1,000 and your AGI is $51,000 you get no deduction. If the total is $2,000 and your AGI is $51,000 you can deduct $980.