Employment Law

Employers And Mileage Reimbursements: IRS Announces New Rates For 2013

Though the IRS rates deal more with the deductible costs that a company may incur, knowing the business law surrounding reimbursement expenditures is essential for any organization.

The Internal Revenue Service recently released its optional standard mileage rates for American businesses, taking effect January 1, 2013 and affecting costs for automobile operation and reimbursement.

Given the recent case that Wetseal, a clothing company in California, faced regarding mileage reimbursement, it is necessary for companies to remain wary of any changes to the rates that must be paid.

Though the IRS rates – 56.5 cents per mile for business miles driven, 24 cents per mile driven for medical or moving purposes and 14 cents per mile driven in service of charitable organizations – deal more with the deductible costs that a company may incur, knowing the employment law surrounding reimbursement expenditures is essential for any organization.

"Under California Labor Code Section 2802, employers must fully reimburse employees for all expenses actually and necessarily incurred," the California Chamber of Commerce said in a statement. "Many employers typically choose to use the IRS mileage reimbursement rate, but its use is optional."

Relying on these rates may be easier for businesses that have a large staff that is constantly on the move. This allows for increased transparency and a unified front by the company, as employees will all be given the same rates and compensation.

Even if the rates outlined by the IRS are used, there still needs to be attention paid to the potential for higher than expected costs claimed by an employee.

"If an employee can show that the chosen mileage reimbursement rate, even the IRS rate, does not cover all actual expenses the employee has incurred, however, the employer must pay the difference," the chamber explained in the statement.

Employers need to inform staff members of the rates that the company is going to use for reimbursing travel expenses, and making this information visible will help to prevent any grievances on the matter.