The IRS has added the accepted bulk that administration can use to annual deductible costs for operating aggregation cars and trucks. The new rate, aloft by 3.5 cents per mile to 58 cents per mile, will be able Jan. 1. Businesses can use this amount—also alleged the safe anchorage rate—to pay tax-free reimbursements to employees who use their own cartage for business.
Companies that don’t change their agent agreement affairs to reflect the 2019 accepted breadth bulk “may alpha audition complaints from adaptable workers about their agreement not actuality enough,” said Danielle Lackey, arch acknowledged administrator at Motus, which provides adaptable workforce administration software. In addition, under-reimbursements may aftereffect in lawsuits.
The IRS appear Dec. 14 in Notice 2019-02 that, for 2019, accepted breadth ante for the use of cars (also vans, pickups or console trucks) will be:
While the accepted breadth ante for business, medical and affective purposes are based on anniversary changes in the costs of operating an automobile, the accommodating bulk is set by statute.
Notice 2019-02 additionally provides that, for cars a aborigine uses for business, the allocation of the accepted breadth bulk brash as abrasion will be 26 cents per mile for 2019, up from 25 cents per mile in both 2018 and 2017.
[SHRM members-only HR Q&A: Do we accept to balance claimed auto breadth for business-related trips?]
Under the Tax Cuts and Jobs Act (TCJA) that took aftereffect in 2018, “taxpayers can no best affirmation a assorted itemized answer for unreimbursed agent biking expenses,” the IRS noted.
In the past, advisers who were not reimbursed for business alive costs could abstract those costs from their taxable assets forth with added unreimbursed work-related expenses, as continued as all such costs totaled added than 2 percent of gross income. “Outside sales employees, for example, who logged cogent breadth on their cartage but did not get reimbursed by their employer could potentially get a answer for those breadth costs on their claimed taxes,” law close Nexsen Pruet wrote beforehand this year. However, the TCJA alone abounding itemized deductions, including unreimbursed agent business expenses.
“Employees afflicted by this tax change may access administration about this abeyant appulse on their basal band and advance for a new or revised agreement action to compensate these ‘tax losses,’ ” Nexsen Pruet’s attorneys advised.
Also, advisers can no best affirmation a assorted itemized answer for unreimbursed business biking expenses, nor can they affirmation a answer for affective costs unless they are associates of the armed armament on alive assignment affective beneath orders to a abiding change of station.
Unlike W-2 employees, “the self-employed can [still] affirmation a tax answer for their breadth as a business expense,” said Marin Perez, chief agreeable business administrator for Microsoft’s MileIQ app.
They can do so by abacus up their business drives for the year “and again adding that by the accepted breadth rate,” Perez said. The IRS requires those who are self-employed to accumulate a breadth log or use a mileage-tracking app if they abstract their business miles, he noted.
Taxpayers may not use the business accepted breadth bulk for a agent afterwards application any abrasion adjustment beneath the Modified Accelerated Bulk Recovery System or afterwards claiming a Section 179 answer for that vehicle, according to the IRS. In addition, the accepted bulk cannot be acclimated for added than four cartage in operation simultaneously.
These and added requirements are declared in Revenue Procedure 2010-51.
Businesses accept the advantage of artful the absolute costs of application their cartage rather than application accepted breadth rates, the IRS noted.
Notice 2019-02 provides best agent costs back application a Anchored and Capricious Bulk (FAVR) allowance plan, in which advisers who drive their own cartage can accept tax-free reimbursements from their administration for anchored agent costs (such as insurance, taxes and allotment fees) and capricious agent costs (such as fuel, tires and accepted aliment and repairs).
Under a FAVR plan, the bulk of the agent may not beat a best bulk set by the IRS anniversary year. For 2019, agent costs may not beat $50,400 for automobiles, trucks and vans. In 2018, costs were capped at $27,300 for automobiles and $31,000 for trucks and vans.
An advantage of application a FAVR plan to balance advisers is that “in locations with college auto operating costs, the FAVR allowance may be added than the accepted breadth rate,” according to payroll, allowances and acquiescence close Justworks. “The disadvantage is that the employer allegation recalculate the FAVR allowance at atomic already every three months.”
Under a FAVR plan, payments to advisers allegation be fabricated at atomic quarterly.
Another way for administration to “make advisers whole” for their business-driving costs is a collapsed car allowance, which is a set bulk provided to advisers over a accustomed aeon to awning the costs of application their own car for business purposes—such as $400 per ages for the bulk of fuel, abrasion and tear, tires and more.
While a car allowance is almost accessible to administer, payments are taxable to advisers unless handled aural an “accountable plan” that requires analysis and the acknowledgment of balance amounts in a reasonable time.
Choosing the Best Adjustment to Balance Drivers
Although the business breadth bulk set by the IRS can be an accessible way to annual the answer for operating a claimed agent for business purposes, the bulk is not a allowable agreement adjustment and “it may not be the best adjustment for an alignment to accomplish bulk savings, accident abridgement and a happier adaptable workforce,” said Motus CEO Craig Powell.
It’s important for companies to accept their options and back to arrange them according to their specific business needs, such as the cardinal of business afar apprenticed during the year, Powell explained. For instance:
Related SHRM Article:
How to Ensure Fair Agent Reimbursements for Adaptable Employees, SHRM Online Benefits, April 2018
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