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  • Gas prices

    Our business in located in CA, the employee in question resides and works in NC. This particular employee is a sales representative for our company. He travels quite a bit and our company in the past has reimbursed for gas/mileage at a rate of 40.5 cents per mile. Does anyone have any thoughts on this? Is 40.5 cents per mile the legal requirement and are we able to offer more if we wish? Should we be considering the gas prices? Any thoughts on this would be greatly appreciated.

  • #2
    Legally you are fine to do it the way that you are. You could also legally pay more, though if you started paying something excessive (say, $3/mile) it would start to look like something fishy was going on.

    Practically, it would probably be nice to take rising gas prices into account in the interest of treating your employee fairly.

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    • #3
      Just a point - while you can reimburse him as much as you like for mileage, if you go over the IRS rate it becomes taxable income to him.
      The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

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      • #4
        Gas Prices

        So basically the IRS rate is 40.5 and that is not taxable as far as the employees income is concerned? And thanks cbg and grasmicc

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        • #5
          You might have an accountant look into this. If you go to the tax law board which is in this forum you will get some better answers.

          That being said:

          Correct that the employee automatically is exempt from 40.5/mile for actual miles travelled. Thus, the first 40.5 is never taxable.

          However, if the employee's actual costs for driving exceed 40.5/mile, and certain other criteria are met, the employee can deduct the actual cost even if it is in excess of 40.5/mile.

          The 40.5 rule is easy, the other rule is extraordinarily complicated. Most people just stick with 40.5. You might consider just giving a bonus related to miles driven and unofficially say it is to offset increasing gas costs. Bonus would be taxable just like regular pay.

          http://www.irs.gov/pub/irs-drop/rp-04-64.pdf

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          • #6
            Originally posted by grasmicc
            Legally you are fine to do it the way that you are. You could also legally pay more, though if you started paying something excessive (say, $3/mile) it would start to look like something fishy was going on.

            Practically, it would probably be nice to take rising gas prices into account in the interest of treating your employee fairly.
            right~
            if you are the employee, you will hope your boss take rising gas prices into account, isn't it?
            Review>>Tools>>Sales
            >>Teach

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            • #7
              However, the IRS rate was just increased last week to $.485/mile, retroactive to Sept. 1 and through December 31, 2005 only.
              http://www.irs.gov/govt/fslg/article...148070,00.html
              I don't respond to Private Messages unless the moderator specifically refers you to me for that purpose. Thank you.

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              • #8
                Thanks!

                That is great information, I hadn't seen that, thank-you!

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                • #9
                  Thanks. I didn't know that.

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