I have 1099 Misc Income for 2012,and have a question.This money was given to employees to help with the high cost of gas,a $10 day allowance.This did not come from an expense report turned into the office,it was a company decision.I know I have to file Schedule C for this income,can I deduct mileage from this income? Am I able to take a loss on this income,as my mileage,at the standard mileage rate,exceeds this amount?

An employer that reimburses travel under a nonaccountable plan is supposed to add those reimbursements to income and withhold the appropriate taxes. If your employer gets caught by the IRS handling travel in this manner he is going to get a bill for the payroll taxes due. This assumes you are an employee receiving a W-2.

If you are an employee (on W-2) it is my opinion that you should prepare your return as close as you can to put you in the same position as you would be in if the $10/day was on the W-2. I would suggest you file the Schedule C with no deductions. Any business travel as an employee which is not reimbursed (or exceeds the reimbursement) goes on Schedule A as an itemized deduction subject to the 2% limitation.

Was this for business travel, or just for driving back and forth from home to your office?

I am an employee,and do receive a W-2.I work as a carpenter,and do not have a permanent job site.The company did this to help with high gas prices,there was no clear definition that this was a reimbersment

I think you should report your mileage on schedule C. Do not add commuting miles. If there is a loss, do claim it.
Suppose your employers reimburses you at standard mileage rate under accountable plan. That is you provide receipts or travel record to support your expenses and employer does not report it on W-2.
This is same as claiming the loss on schedule C if reimbursement by employer is less than the standard mileage rate.