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HR MATTERS E-TIPS
THIS WEEK’S E-TIP: IRS Makes Mid-Year Increase to Standard
Mileage Rate
Published by Personnel Policy Service, Inc.
"Your Policy and Compliance Experts Since 1972"
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THIS WEEK’S E-TIP: IRS Makes Mid-Year Increase to Standard
Mileage Rate
Sky-high gas prices have prompted the IRS to increase its optional
mileage reimbursement rate mid-year. Find out what the new rate is and
when it takes effect. |
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THIS WEEK’S E-TIP: IRS Makes Mid-Year Increase to Standard
Mileage Rate
The Internal Revenue Service (IRS) last week announced a major
increase to the optional standard auto mileage reimbursement rate
for
the last six months of 2008. The IRS raised the optional mileage
reimbursement rate eight cents to 58.5 cents per mile beginning
today,
July 1, up from 50.5 cents for the first six months of 2008.
The tax agency normally makes changes to the standard auto mileage
reimbursement rate in the fall that take effect on January 1 each
year.
However, on rare occasions, the agency will increase the rate during
the
year to reflect significant economic changes. For example, the IRS
last
increased the mileage reimbursement rate in the middle of the year
from
September to December 2005 to reflect the higher gas prices
associated
with Hurricane Katrina. It then lowered the rate in January 2006.
Normally, the tax agency bases the rate on its annual study of the
fixed
and variable cost of operating an automobile. This latest eight-cent
increase is the direct result of increased gas prices. According to
the
American Automobile Association (AAA), the national average for a
gallon of gas in the United States is about $4.08, compared to just
$2.96
a gallon a year ago. |
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Note that you are not required to reimburse employees for
business use
of private vehicles. As a matter of policy, however, most
employers
choose to do so in recognition of the expense and the wear and
tear the
extra business miles cause. For convenience, most organizations
use
the IRS optional mileage allowance. (Download
free Automobile Usage
model policy.)
The allowance permits you to reimburse employees based on a
fixed
amount per mile to cover the expense of operating personal
vehicles
while traveling away from home on business. This allowance is
the
maximum the IRS will allow without requiring substantiation (or
documentation) of actual expenses. (If you pay more than the IRS
optional mileage allowance, the amount in excess of the optional
mileage
allowance is treated as income to the employee and is subject to
withholding and the payment of employment taxes.)
The IRS announced the new optional mileage reimbursement rate in
Announcement 2008-63, available online at
www.irs.gov/pub/irs-drop/a-
08-63.pdf. |
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Subscribers to the
Personnel Policy Manual (print/online) and HR Policy Answers on
CD can find information on the IRS mileage reimbursement rate in
Automobile Usage, Chapter 402, note 23.
Not a subscriber? If you would like to order one of our policy
chapters,
go to:
http://www.hrpolicyanswers.com.
If you have any questions, please call us at 1-800-437-3735. We'll
be
happy to help you. |
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