By Alan Olsen, CPA, MBA (tax)
Greenstein Rogoff Olsen & Co. LLP
Although most people typically use their vehicles to commute back and forth to work, there are many individuals that are required to use their personal vehicles as part of their job. Did you know that you could be reimbursed for those miles? You can. Plus, there’s more good news for those who have to drive their own vehicle for work. That’s because beginning January 1, 2015, the standard mileage rate for the business use of a car (vans, pickup or panel truck) will go up.
New Mileage Rates for 2015
According to the numbers recently released by the IRS the mileage rates for next year will be:
Miles driven for business – 57.5 cents per mile (up from 56 cents in 2014)
Miles driven for medical or moving purposes – 23 cents per mile (down half a cent from 2014)
Miles driven in service of charitable organizations – 14 cents per mile
The IRS bases the business standard mileage rate on an annual study of the fixed and variable costs of operating a motor vehicle. Those factors include:
Tires and maintenance
Gas and oil
Meantime, the rate for medical and moving purposes is based on the variable costs, such as gas and oil, while the rate for driving for charitable purposes is set by law. However, taxpayers do also have the option to calculate the actual costs of using their vehicle for these purposes instead of using the standard mileage rates.
California Labor Code 2802
There is one other important item to consider for California residents in regards to these changes. Under California Labor Code section 2802, employers must fully reimburse employees for all expenses actually and necessarily incurred. Although, many employers generally choose to just follow the IRS mileage reimbursement rate, they actually do not have to use that option.
Employee Can Get More With Proof
That’s because the Division of Labor Standards Enforcement has stated that when an employer uses the IRS mileage rate it will generally satisfy that employer’s obligation to reimburse for business related vehicle expenses, absent evidence to the contrary. However, if an employee has evidence and can prove that the mileage reimbursement rate his or her employer chose to use – even if it was the IRS’s rate – does not completely cover all of the actual expenses that the employee has incurred, then the employer must pay the difference to the employee.
The Entire Spectrum
It’s important to note that business vehicle expenses do not solely include the cost of gasoline. Those expenses also include any wear and tear that occurs with continued use of the vehicle (or depreciation), as well as, repairs, oil, insurance and any other relevant costs.
Keep Detailed Records
If you have to use your vehicle for business purposes and you want to be reimbursed for that usage, then the best thing to do is to keep detailed records of your mileage, your fuel expense and any other expenses related to your vehicle throughout the year. You’re entitled to that money, so make sure you do whatever you need to do to receive it. There is one other important item to consider for California residents in regards to these changes. Under California Labor Code section 2802, employers must fully reimburse employees for all expenses actually and necessarily incurred. Although, many employers generally choose to just follow the IRS mileage reimbursement rate, they actually do not have to use that option.