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August 17, 2010
Variable Mileage Reimbursement Rates

In a BLR webinar entitled "Mileage/Commuting Expenses: How to Avoid Big Mistakes With These Employee Expenses," Mark E. Tabakman, Esq., partner in the nationwide law firm Fox Rothschild, LLP and Stacy Wade, Ph.D., CPA, assistant professor of accounting at Western Kentucky University, explained that when employees use personal automobiles extensively for business purposes, the company might set up various mileage allowances to allow for differences in car makes and miles driven.

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  • This approach will save you money with high-mileage drivers, because the standard Internal Revenue Service (IRS) rates you may pay them could far exceed their actual vehicle operating costs!
  • Variable reimbursement rates are more complicated to administer, but will more accurately reflect the actual cost of operation of particular employees' cars and could substantially reduce the amount spent reimbursing employees for the use of their cars. For example, if you have sales representatives who routinely use their personal cars to drive long distances each week to call on clients, but those miles are largely highway miles (meaning the actual operating expenses for the cars are probably lower than city-driven miles), you might consider offering a mileage reimbursement rate below the standard IRS allowance.
  • Firms like Runzheimer (www.runzheimer.com) can help you set variable mileage rates based on your geographic location, type of business, and other factors.

Mark E. Tabakman, Esq., is a partner in the nationwide law firm Fox Rothschild, LLP (www.wagehourlaw.foxrothschild.com). He advises clients throughout the country on all aspects of labor relations and employment law, as well as the development of corporate employment policies. Stacy Wade, Ph.D., CPA, is assistant professor of accounting at Western Kentucky University (www.wku.edu). She teaches undergraduate and graduate courses in financial accounting and taxation.

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