I’d like to take a moment to explain what the IRS business mileage rate means to small business owners. It’s quite simple really…it’s the maximum amount per mile you can deduct from taxes if you’re reimbursing using the mileage method. If you reimburse employees more than this rate, the overage is taxable to them (known as a taxable fringe benefit). On the flip side, you don’t HAVE to reimburse this amount. It’s the MAXIMUM deductible amount, not the required amount (unless you’re in California, everything is different there!).
So, if you’re like many of the small businesses I work with and the thought of reimbursing 50.5 cents/mile for a trip to the post office is something you can’t handle, it’s okay. It’s nice to reimburse at the IRS rate, it’s a good thing to do, but you don’t have to. Sure, your employees will complain because all of their ill-informed friends have told them they are mistreated. You can simply tell them that the IRS sets the maximum tax deductible amount and they can consult with their tax preparer about the possibility of deducting the rest. The IRS certainly doesn’t know how to manage your business!