Beginning on Jan. 1, 2011, the following standard mileage rates for using a vehicle (cars, vans, pickups or panel trucks) will apply:

• 51 cents per mile for business miles driven
• 19 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The new rates for business, medical and moving purposes are slightly higher than last year’s rates. These are the tax deductible rates that the IRS allows you to reimburse your employees for their driving on behalf of your company. You can go higher or lower if you choose but if you pay higher, the IRS will not allow you to deduct the amount over their designated rates.

The IRS website explains:

“The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Independent contractor Runzheimer International conducted the study.

“A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles used simultaneously.

“Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.”

What Should You Do?

• Review your policies to ensure reimbursing employees at the proper rate for 2011.
• If you intend to change the reimbursement rate, notify your employees.
• Consult with Champion to be sure you are prepared all the HR compliance changes in 2011