After weeks of vowing they wouldn’t budge the mileage rate despite high gas prices, IRS turned around last week and raised the rate for the rest of the year.
We thinks the Taxman doth protest too much! IRS said it was logistically challenging to move the rate mid-year. Then the Service expressed concerns over what would happen if gas prices receded after they did move the rate.
And then they moved it anyway!
Last week IRS added another 4.5 per mile to the amount you can reimburse employees tax-free, for any business mile they drive.
The new standard mileage rate for the remainder of 2011 will be 55.5 cents per mile, effective July 1.
But the feds didn’t stop there. IRS also increased the moving and medical rate by the same near-nickel amount: Starting July 1, that rate increases to 23.5 cents a mile, up from 2011’s original 19 cents.
No charity for charitable organizations, though. That rate will hold at 14 cents per mile.
Keeping mid-year mistakes to a minimum
Of course, the change is welcome news to employees and employers. However there’s bound to be some confusion — and possibly some expense reports to kick back — seeing as employees have been using the same rate for the past six months.
To keep that to a minimum:
- Announce the change ASAP, and in a variety of ways. The new rate kicks in Friday – July 1 – so there’s not much time. You want to get the word out fast, and using many mediums: memo, email, on your intranet. That way there’s little chance employees will miss the news before they fill out that next expense report.
- Error-proof your reports. Speaking of which, have A/P staffers do what they can to make sure the expense reports that get submitted starting next week are calculated with the new, higher rate. If your report form has the rate embedded in it, issue a new version ASAP. Even if you don’t, it couldn’t hurt to crank out a new version of the form with the mileage rate printed on it. Something as simple as a sign asking “Did you calculate with the new 55.5 cents per mile rate?” where reports are turned in can mean A/P will have fewer forms to kick back in the coming weeks and months.