IRS standard rate reimbursements | Mike’s Mile-a-Minute

In our first video from a new series with Cardata Co-CEO Mike Levine, we look at whether paying the IRS standard rate for business driving is fair to drivers and cost-efficient for companies.

The transcript is below!

Want to learn more about the IRS standard rate?

If you would like to learn more about the IRS standard rate, and Cents per Mile (“CPM”) programs, here are a few more articles to get you started:

If you want a general introduction to CPM and the standard rate, start here:

What are Cents Per Mile (CPM) Employee Vehicle Reimbursements?

Want to know the IRS standard rate for this year, 2022? Start here:

The IRS standard mileage rate for 2022

Canada sets its own standard rate, called Cents per Kilometre rather than Cents per Mile. Read about it here:

The Canada Revenue Agency sets new per kilometre rate for 2022

If you want to know what Finance and Operations Executives think about CPM programs, start here:

When should I pay Cents per Mile in 2022? Finance and Ops perspectives

Transcript

Hi. I’m Mike Levine, co-CEO of Cardata. Welcome to Mike’s Mile a Minute, a segment where we’re going to talk about trending topics in vehicle reimbursement.

Today, we’re going to talk about when you should pay your employees at the IRS rate.

Every year, the IRS publishes a rate that you can pay your employees tax free for the use of their personal car for business.

The IRS rate works well for the very infrequent driver. Think about the receptionist that needs

to drive to the bank to drop off a check. Think about the driver that very infrequently leaves their desk, but has to go out a on a sales call, or some other trip.

They likely already have a car in their personal life, and you’re just giving them a fair reimbursement for the very, very infrequent use of that car.

Where the IRS rate really doesn’t work well is when you’ve asked an employee to have a car available for work use, but you only pay them for variable miles driven.

Think about the driver that buys a brand new car, puts insurance on the car and keeps it in their driveway available for use. And let’s say they drive 100 miles one month. That’s 58 and a half dollars of reimbursement.

That’s not enough to insure the car for that month. That’s just not fair to that driver.

On the opposite side of the spectrum, think about the road warrior that drives 50,000 miles a year. We have some drivers on our platform that are driving that much, and if we paid them at the IRS rate, they’d be making $30,000 in reimbursements a year.

That’s insane. I don’t think you structured a reimbursement plan to buy your driver a new car every year. That just doesn’t make sense here.

At Cardata, we structure reimbursement programs that capture the true operating cost of the vehicle. Join us next segment where we’re going to talk about why using data is a necessity for determining fair and accurate reimbursement payments for your drivers. 

See you next time.

Disclaimer: nothing contained in this blog post is legal or accounting advice. Consult your lawyer or accountant and do not rely on the information contained herein for any business or personal financial or legal decision making.