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Mileage reimbursement rates

Bob Manzi's Profile

mileage reimbursement ratesWe are looking at mileage reimbursement rates for 2015. We currently reimburse our local sales reps a flat amount ($ .27) per mile. I'm trying to get a sense of what other companies (particularly in Colorado) are doing.

Answers

Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

I am not in Colorado, but I have not heard of a reimbursement greater than the IRS allowable amount. The 2014 IRS allowable reimbursement was .56/mile, announced December 6, 2014.

Randy Moore
Title: CFO
Company: SJB Bagel Makers of Boston
(CFO, SJB Bagel Makers of Boston) |

While rare, reimbursement greater than the IRS rate does happen. When it does, it (the excess) creates taxable income for the recipient.
The usual scenario when this happens is when the rate goes down from one year to the next, as it did from 2013 (0.565) to 2014 (0.56 cents per mile).

As an aside, the standard mileage rate is actually established by the GSA, not the IRS.

Tamer Guirguis
Title: Account Executive - Adoption Services
Company: DayNine Consulting
LinkedIn Profile
(Account Executive - Adoption Services, DayNine Consulting) |

Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

• 56 cents per mile for business miles driven
• 23.5 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

So far the IRS has not updated the mileage rate therefore this is the current rate until further notice.

* Keep in mind if the employer chooses to reimburse at a rate lower than IRS rate, the employer accepts certain liability for any loos or damage to the employee's automobile that occurs while he/she is on company business.
Check out this labor code section 2802(a)

Anonymous
(Director, Finance and Accounting) |

Tamer

Does labor code section 2802(a) apply only to California or is this a national code?

Anonymous
(Senior Manager - Finance) |

It's a competitive issue: what are your key competitors offering their sales people?
I do find it striking that you're reimbursing at less than half the rate the IRS allows - that seems unnecessarily low to me. I mean, really, do you want a reputation as being more stingy than the IRS?

Sandra Ehn
Title: Sr. Revenue Accountant
Company: VersionOne
(Sr. Revenue Accountant, VersionOne) |

I moved from Colorado and we reimbursed the IRS allowable rate. I don't understand why a company would choose to use less than the IRS rate either; they are usually conservative and the sales reps are using their own vehicles, wear and tear, gas, etc. That is worth (cost) a lot more than $0.27/mile. You may find yourself losing sales reps if they travel a lot and find this lower reimbursement is an anomaly among companies within or outside of your industry. I am in the high tech industry working for a startup.

James Scott
Title: Consulting CFO
Company: Early Growth Financial Services
LinkedIn Profile
(Consulting CFO, Early Growth Financial Services) |

We reimbursed our Reps in Colorado same as everywhere else, whatever the IRS allowable rate is.

Robert Meybohm
Title: Owner
Company: Meybohm & Bodell, LLC
LinkedIn Profile
(Owner, Meybohm & Bodell, LLC) |

Bob: I suggest you fix this policy in the upcoming year. I have never heard of a company that does not reimburse at the IRS rates. The IRS rates are too low, so your company is being very unrealistic and is creating ill will with the sales staff; not a good plan! And don't think they don't talk and grumble about this. This will be a big winner when you make the change.

Topic Expert
Patrick Dunne
Title: Chief Financial Officer
Company: Milk Source
(Chief Financial Officer, Milk Source) |

We have always paid the IRS rates. For those in leased cards we pay $0.18 per mile to cover gas. We do this nationwide.

Anonymous
(CFO) |

Our sales people who use their cars all the time receive a flat monthly allowance for their car, and we reimburse them for all their gas. Employees who use their cars occasionally are reimbursed $0.50 per mile.

Christy Fliflet
Title: VP of Finance
Company: FEI Inc.
LinkedIn Profile
(VP of Finance, FEI Inc.) |

In the past few years we have started following the standard IRS mileage reimbursement rate. $0.27 seems very low to me. I would expect you have a lot of complaints about that reimbursement rate and/or have trouble keeping employees in those positions. Our salesmen would not be able to cover fuel, maintenance and other related vehicle expenses at that rate.

Jim Hinkel
Title: CFO
Company: RyMed Technologies
LinkedIn Profile
(CFO, RyMed Technologies) |

We pay our sales reps a $600 monthly auto allowance ($500 for sales managers) and reimburse them for their gas if they travel outside a 60 mile radius from their home office base. Other employees are reimbursed for business mileage at the current IRS rate.

Liz Perpich
Title: Director of Finance & Administration
Company: Ann Arbor SPARK
(Director of Finance & Administration, Ann Arbor SPARK) |

Just to clarify, for the $600 per month auto allowance combined with the gas reimbursement - that is taxable income to them if they do not show enough miles at the IRS rate to justify that amount of payment, correct?

Bill Jancosko
Title: Partner, CFO
Company: Timepiece Capital Inc.
(Partner, CFO, Timepiece Capital Inc.) |

Every time we have done a detailed spreadsheet analyzing the cost of ownership and use of a car for mileage reimbursement purposes we have always come up lower than the IRS rate. We include everything... tire wear, oil, gas, depreciation, est R&M, insurance, etc. I suggest you take the time to do the math.

Karl Nicholls
Title: Principal
Company: BTN LLC
(Principal, BTN LLC) |

Kelly Blue Book has great analysis on cost of ownership of 100s of vehicles.

Tamer Guirguis
Title: Account Executive - Adoption Services
Company: DayNine Consulting
LinkedIn Profile
(Account Executive - Adoption Services, DayNine Consulting) |

That labor code applies to California; However, IRS rates are a national rate. There is some exception in some states that their rates are allowed to be below the IRS rate. For Example state of Massachusetts is $0.45 / Mile, Colorado 2WD $0.50 / 4WD $0.53, See link below:

https://www.colorado.gov/pacific/osc/mileage-reimbursement-rate

http://www.mass.gov/anf/employment-equal-access-disability/employee-benefits-and-comp/mileage-rates/private-auto-employee-reimbursement-rates-per-mile.html

I encourage each employer to check their State Labor Code and consult a lawyer if it is a must. The lawsuits in regards to that issue can turn very nasty.
If an employer is paying too much to their employees in mileage rates then I suggest a comparison between paying y at standard rate or giving monthly allowances and go with each ever is less

Leslie Karnauskas
Title: CFO
Company: BMGI
(CFO, BMGI) |

I'm in Colorado and for every company I have ever worked at we have used the IRS rate.

Chris Winter
Title: CEO
Company: Winter property managemant
(CEO, Winter property managemant) |

I worked for a couple of companies now that pay a flat rate of $500. a month. Since there is no legal requirement of a "minimum" rate, pay your employee whatever you think minimally you can get away with. Several factors to consider is the type of car they drive, what it gets per mpg, age of car and estimated maintenance costs and finally the average price per gallon of gas where your employee will be driving. You don't want to be buying their car, or paying for their full cost of insurance, only what your company use of their vehicle amounts to. Agreeably .26 per mile is a bit on the low side, when .56 per mile is the standard norm and the legal limit before tax issues arise.

Jeff Durbin
Title: Chief Financial Officer
Company: F. Gavina and Sons, Inc.
(Chief Financial Officer, F. Gavina and Sons, Inc.) |

We provide the vehicles and a gas card to our sales reps. Would you really like your reps to show up on a sales call with a rusted, ancient or damaged vehicle?

Randy Moore
Title: CFO
Company: SJB Bagel Makers of Boston
(CFO, SJB Bagel Makers of Boston) |

I have known sales rep that purposely do exactly that - drive clunkers. They believe it gives the customer the impression that they are paying low prices since the company can only afford well worn wheels.
If they were to show up in a Bentley, the opposite impression might eb made.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

I have a more "liberal" (maybe not the right word) view on the subject. Companies need and should provide it's employees the resources they need to do their jobs. This includes transportation/cars. From my point of view, we should avoid the notion that we are doing the employee a favor by giving them the allowance/reimbursement. Heck, I am even in the position that the employee is doing the company a favor by having them use their cars.

That being said, I acknowledge the need for flexibility and compromise but coming from my point of view, the "arrangement" should be to the advantage of the employee and not the other way around.

Terry M. Cooney
Title: CFO
Company: New West Oil Company LLC
(CFO, New West Oil Company LLC) |

I suggest looking at Motus LLC, fka Corporate Reimbursement Services (CRS Inc). They will provide a structured, documented, qualified reimbursement plan for a reasonable annual fee that includes a variable component and a fixed component. Using the IRS as a business guide is like expecting the Feds to know how to run a business. :)

Vik Agrawal
Title: President & Co-Founder
Company: ExpensePath, Inc.
(President & Co-Founder, ExpensePath, Inc.) |

The IRS usually announces the rates 1 to 2 months before a change so 2015 is not yet out.

Our experience with customers setting mileage reimbursement policies is that the overwhelming number of companies reimburse at the IRS rate but we do have some who reimburse below (none above it). We also have customers with non-US employees who usually have a different rate (i.e Canada starts at .54/km up to 5,000 km and .48/km after that).

California is absolutely a special case that you should be aware of:
- If you reimburse below the IRS rate, the employee can claim the difference as a deduction on their personal taxes and the company cannot claim that deduction.
- If you reimburse below the IRS rate, the company takes the liability for any costs related to use of the car for business.

The IRS has occasionally made mid-year adjustments when gas prices spiked suddenly - I think I recall situations where some larger companies decided to increase the reimbursement rates temporarily above the IRS rate to avoid employees from being dinged for the higher price of gas.

Sherry Hudson
Title: Sr. Payroll Manager - Americas
Company: Resmed CORP
(Sr. Payroll Manager - Americas , Resmed CORP ) |

Our sales force receive an auto allowance, however, they are allowed to receive mileage reimbursement too. We're looking to reduce the reimbursement to .27, instead of the .56

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