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Employment Law Blog

Wednesday, June 25, 2008

IRS Increases Mileage Rates Due To Gas Prices

On June 23rd the Internal Revenue Service announced an increase in the standard mileage rates for the final six months of 2008.

The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008.

The IRS announced the unusual mid-year increase in recognition of recent gasoline price increases. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

“Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile,” said IRS Commissioner Doug Shulman. “We want the reimbursement rate to be fair to taxpayers.”

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

To view the IRS announcement, click here: IRS News Release

Employers should consider increasing the reimbursement rates to match the new IRS rate. Generally, employers must reimburse employees for travel expenses incurred in the course of work. For example, in California, Labor Code section 2802, subdivision (a), requires an employer to indemnify its employees for expenses they necessarily incur in the discharge of their duties. Note that in California, paying the IRS rate does not guarantee that the employer has fully reimbursed the employee for actual travel expenses. The California Supreme Court recently addressed employee travel expense reimbursement in a case titled Gattuso v. Harte-Hanks Shopper, Inc.

Submitted by:
Christopher W. Olmsted, Esq.
Barker Olmsted & Barnier, APLC
San Diego Employment Law Attorneys

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