The Internal Revenue Service announced in late June an increase in the optional standard mileage rate for the last half of 2011. The rate has been increased from 51 cents to 55.5 cents per mile for business travel from July 1, 2011 to December 31, 2011. The IRS ordinarily updates mileage rates each Fall for the next calendar year. This increase comes ahead of schedule in recognition of rising gas prices.
In general, employers must reimburse employees for expenses such as gas incurred during travel for business purposes. California does not set any specific reimbursement rate for mileage for private employers who use their own vehicles for work purposes; the mileage rate set by the IRS is optional. However, an employer could be liable for any costs incurred not covered by the employer’s alternate mileage reimbursement rate.
If an employee brings a wage claim for mileage reimbursement, the Labor Commissioner will generally use the IRS rate to calculate the unpaid mileage. The IRS mileage rate is presumed to be sufficient to cover average costs of operating a vehicle, including insurance carried by the employee on a personal vehicle, without evidence to the contrary.
As long as an employee requesting mileage reimbursement substantiates the business purpose within a reasonable time (two months is a safe harbor), the reimbursement is excluded from the employee’s gross income and is exempt from the withholding and payment of employment taxes..
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