EFFECTIVE JANUARY 1, 2011

NEW IRS MILEAGE REIMBURSEMENT RATE  
    

The IRS just announced an increase in the standard mileage rates, effective January 1, 2011.  The new rate will be 51 cents per mile for all business miles driven.  This increase is important because California employers have a legal duty to reimburse employees for all necessary expenses incurred in performing their jobs.  This includes reimbursing employees who drive their own vehicles for business purposes. 

There are several methods employers can use to calculate reimbursement costs for employees who use their own vehicles for work-related reasons. The "mileage reimbursement" method allows employers to use the IRS business mileage rate in lieu of tracking the actual costs incurred.  While California law does not require employers to use the IRS rate, there is a presumption that this rate is reasonable.   Employers who do use the IRS rate should increase it to 51 cents starting January 1, 2011.   

It should be noted that using the IRS rate does not guarantee that the employer has fully reimbursed the employee for work-related vehicle expenses. If the employer can prove that the reimbursement amount is less than the actual expenses incurred, the employer must make up the difference.  For employers who do not want to use the mileage reimbursement method, there are several other ways to satisfy their legal duty to reimburse employees for work-related vehicle use.  

With so many requirements surrounding employer reimbursement of business expenses, it is imperative that employers become familiar with the available options for complying with these requirements.