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IRS ADJUSTS MILEAGE PROCEDURE |
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September 28, 2005 – Recent gas price trends have impacted the standard mileage rate allowed by the IRS. Small business owners should be aware of the latest adjustments and take full advantage of available deductions.
The IRS normally updates the mileage rates once a year in the fall for the next calendar year. However, because of recent gas price trends, the IRS and Treasury Department recently announced an increase to the optional standard mileage rates for the final four months of 2005. The rate will increase to 48.5 cents a mile for all business miles driven between Sept. 1 and Dec. 31, 2005. This is an increase of 8 cents from the 40.5 cent rate in effect for the first eight months of 2005, as set forth in Rev. Proc. 2004-64.
According to Sharon Claar, CPA and founder of JTB Associates, LLC, a Naperville-based accounting firm, “while this does provide some relief, business owners should proceed with caution and talk with their tax advisors to decide which accounting method provides the most accurate vehicle deduction.”
In most cases, the actual costs of gasoline, especially in current times, outweighs what the IRS offers. While gasoline is a major factor in the mileage figure, other items enter into the calculation of mileage rates, such as the price of new vehicles and insurance.
The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of the extra burden of tracking actual costs, and often times, is the preferred method for expediency.
Claar, an advocate for small business, recognizes that most business owners keep records of vehicle operating costs and compare actual costs to the standard mileage rate.
A standard mileage rate is just used as a benchmark by the federal government and many businesses to reimburse their employees for mileage. It does not necessarily mean that such a benchmark accurately represents every business. Claar recommends business owners discuss this overlooked item with their account or tax advisor. “With accurate records in hand, the most expedient way might not be the most lucrative method,” she advises.
It could make a big difference in what you owe to Uncle Sam.
FOR MORE INFORMATION
Ben Bradley for
Sharon Claar, CPA
JTB Associates, LLC
The Main Street Promenade
55 South Main Street, Suite 317
Naperville, IL 60540
www.jtbassociates.com
benbradley@bwmginc.com
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