Serves the Commercial Small Fleet Market of 10 – 50 Vehicles

Low IRS Reimbursement Rate Raises Ire Among Drivers

August 11, 2005

Corporate America is asking its workers to subsidize high gas prices, said a spokesman for Runzheimer International in an August 9 New York Times article. The Rochester, Wis.-based company helps create the I.R.S. standard mileage reimbursement rate. In late 2004, AAA calculated that driving a 2005 Ford Taurus SEL for 10,000 miles would cost 69.1 cents a mile this year. That’s more than 70 percent higher than the 40.5-cent rate allowed by the Internal Revenue Service. Yet with gas now averaging $2.33, the real cost per mile would be about 2 cents higher, or 71 cents.The inequity is most apparent in cities with higher gas and insurance prices than the national average. "If you are using the I.R.S. rate, you are effectively asking your employees to subsidize the cost of operating their vehicle," Lee Czarapata, Runzheimer's director of client relations, said in the article. Czarapata said the I.R.S. rate was never meant to be a reimbursement number. Instead, it is a conglomeration of all operating and fixed costs of a hypothetical "base" vehicle, and is intended to be used only when a taxpayer does not have receipts to substantiate the business use of a vehicle. "The actual cost, depending on where you are, is 50 cents or more per mile," he said.Many businesses use the rate because they know the I.R.S. is unlikely to question it, he said. But the perception that employers are asking for a free ride has increased workplace tensions in some cases. Richard Browne, the director of telecommunications for a health care newsletter publisher in Chevy Chase, Md., said his sales representatives, who spend an average of three days a week on the road, recently lobbied for a 10-cent-a-mile increase above the I.R.S. rate.The company reluctantly agreed to a 3-cent increase for some employees, which he said covers only some of their expenses.General Electric Fleet Services estimates that the mileage reported by employees falls by 30 percent when companies switch from reimbursing them to providing cars - a trend that suggests a certain amount of padding.
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