Periodically the IRS changes the standard mileage allowance – the amount drivers can claim related to driving for business, medical, and charitable purposes.
Effective January 1, 2010, the IRS made very slight adjustments in allowable mileage rates based on changes in fuel and automobile related expenses.
The new rates are:
- 50 cents per mile for business miles driven
- 16.5 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
Remember, the IRS allows two methods of claiming mileage expenses. You may either use the actual costs of operating the vehicle which include fuel, maintenance, insurance repairs, etc. and keep track of each of these costs, or more simply you may elect to use the standard mileage allowance. Most people and small businesses use the standard mileage allowance for tax purposes.
In each of these two methods, it is critical to keep records that show the beginning and ending mileage for each trip taken, the business (or medical / charitable purpose), and any notes which substantiate your travel. IRS rules require these records to be maintained “contemporaneously.” This means that you must record your travel at the time it is made, not at the end of the year. For complete information about various IRS rules related to business use of automobiles, IRS publication 463 has all the details. For rates allowed in all years from 2002 to 2010 the IRS has a chart that shows all rates for the past eight years.
When audited by the IRS, they tend to be sticklers on the issue of record keeping of miles deducted for tax purposes; therefore it is highly critical that your records are perfect.
The standard mileage rate affects individuals using an auto, light truck or van for business and not receiving reimbursement as well as those drivers that do receive a mileage reimbursement. The party that is claiming the deductions must keep the records.
Some employers provide their employees an auto allowance. This is a fixed amount paid each month to cover the employees out of pocket expenses associated with business travel.
If you do elect to give your employees an allowance rather than having them keep detailed records, this money is simply considered by the IRS as additional income. So in the case of a store manager that manages several stores and drives to and from them regularly, if the business owner provides a fixed car allowance each month, then the business and employee must treat it as taxable wages. If you are a business owner, you must treat an allowance as either taxable wages or a distribution of income.
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