Last updated on May 13th, 2019 at 02:27 pm
More small businesses will benefit from changes
The Internal Revenue Service will increase its standard tax deductible mileage rate for business miles to 37.5 cents per mile, up from 36 cents a mile.
The new standard mileage rate, used for business tax deductions, will take effect in 2004.
The standard mileage rates are based on an annual study of the costs of operating a vehicle. Runzheimer International Ltd. of Rochester conducted the study for the IRS. The Racine County firm has done the study each year since the early 1980s.
"The major influencing factor (resulting in the higher mileage rate) were fuel costs," said Ted Schuerman, client service manager for Runzheimer.
The mileage rate increase by the IRS could result in employees, particularly labor unions, seeking higher mileage reimbursements from their employers. However, businesses can set any mileage reimbursement rate they want for their employees. Some employers in areas with high gas prices have reimbursement rates for their employees that are higher than the IRS standard mileage rate, Schuerman said.
The IRS also recently announced that taxpayers who use no more than four vehicles at the same time for business purposes will be allowed to use the standard mileage rate, beginning next year. Currently those using more than one vehicle at a time for business cannot use the standard mileage rate and must track the expenses for each vehicle.
The IRS estimates small businesses nationwide will save eight to 10 million hours a year in record keeping with the new rule.
"With this change more than 800,000 businesses will become eligible to use the standard mileage rate," said IRS Commissioner Mark W. Everson. "This reflects our ongoing interest in reducing the burden for businesses to comply with the tax laws."
Some members of Congress who work on issues pertaining to small businesses also praised the adjustments by the IRS.
"I applaud the IRS for adopting this simplification measure for small businesses," said U.S. Sen. Olympia J. Snowe, R-Maine, chair of the Senate Committee on Small Business and Entrepreneurship. "This change will allow certain small businesses to put a stop to the time-consuming, costly and inconvenient practice of maintaining detailed paper records and, instead, use a simpler, standard mileage rate for business travel expenses when preparing their taxes."
"These changes by the Internal Revenue Service will provide additional needed tax relief to our struggling small businesses so they can once again lead us to recovery," said U.S. Rep. Don Manzullo, R-Illinois, chair of the House Small Business Committee.
Also beginning Jan. 1, the standard mileage rates for the use of a vehicle will be 14 cents per mile when computing deductible medical or moving expenses, up from 12 cents a mile currently, and 14 cents per mile when providing services for a charity, the same as the current amount.
Nov. 14, 2003 Small Business Times, Milwaukee