How will the 2019 IRS standard mileage rate impact your business?
The 2019 IRS standard mileage rate was announced today as $0.58. Next year’s rate increased 3.5 cents from the 2018 rate. Also referred to as the IRS Safe Harbor Rate, the IRS mileage reimbursement rate and IRS business mileage standard, the IRS standard mileage rate takes into account this year’s rise in vehicle costs and gas prices.
What is the 2019 IRS standard mileage rate?
The rate is:
- calculated based on the average costs across the country of owning and operating a vehicle for the previous year.
- meant to be used as a benchmark, or “Safe Harbor” rate, for companies and their employees who don’t keep track of their precise business mileage
What isn’t the 2019 IRS standard mileage rate?
It is not:
- a mandated mileage reimbursement method
- configured to account for real-time fluctuations in things like gas prices and insurance premiums that make up the true costs of driving for work on average across the country
How does the 2019 IRS standard mileage rate impact your company?
There are a number of ways, but the companies that will be most impacted are those that use the IRS rate or other cents-per-mile options as their reimbursement method.
Option 1: Not changing your vehicle reimbursement program with the new 2019 IRS standard mileage rate
Companies that aren’t what one would call “on top of the news” might face this problem. With everything on a company’s plate, prioritization can be difficult. But this change is something that companies should prioritize, given the repercussions of ignoring it.
Companies may start hearing complaints from mobile workers about their reimbursement not being enough. They may also start seeing their drivers making fewer trips. A workplace with low morale is rarely a productive one. What’s more, under reimbursements may result in a lawsuit.
This generally depends on the state a company’s workers are driving in. California and Illinois have strong labor laws that protect employees from under reimbursement. If a court of law finds a company guilty of violating labor laws, they may be paying out serious money to disgruntled employees.
Option 2: Changing your vehicle reimbursement program to align with the 2019 IRS standard mileage rate
Companies taking a proactive approach to variables in their industry will adjust appropriately. Upon finding out about the new rate, they will make arrangements to change their current cents-per-mile rate program. When the new year comes around, their mobile employees will receive the appropriate reimbursement for their mileage.
Unfortunately, organizational costs will also go up by a small percentage. And that doesn’t sound like a lot, but mileage is a top 10 business expense. 100 employees driving 10,000 miles per year gives the company a change of $35,000 this year that they didn’t plan for. And that’s enough for any company to reconsider their vehicle program.
Option 3: Finding a new vehicle program that reduces costs and fairly reimburses mobile employees
Companies that see the costs associated with the cost of ignoring the new rate and adjusting to it have the option to move to a new vehicle program. Different vehicle programs can offer a reimbursement designed for people who drive regularly for business. They can be updated easily and account for variables on a month to month basis. Additionally, they can provide reimbursement beyond the cents-per-mile cost of driving a personal vehicle for work.
What are the right next steps for your company?
This post has hopefully helped you understand the 2019 IRS standard mileage rate and its impact on your company. But this is far from an easy topic and you may still have questions. If you do, reach out to us. We advise the IRS on the yearly rate, providing data to help them reach their number. If you’re looking to adjust your current vehicle program, or maybe explore your options, contact us!