|December 20, 2012|
Previously published on December 13, 2012
The IRS has announced that, effective January 1, 2013, the “optional mileage rate“ which may be used to calculate the costs of business travel for tax deduction purposes will be 56.5 cents per mile, a one-cent increase over the 2012 rate. Under California law, this rate is also presumed to be sufficient to reimburse employees for business use of their automobiles.
Under California Labor Code § 2802, employers are required to fully reimburse employees for any expenses necessarily incurred in carrying out their assigned duties. Employees may sue in court or file an administrative complaint with the California Labor Commissioner’s Division of Labor Standards Enforcement (“DLSE”) to recover unreimbursed expenses, as well as interest, litigation costs and attorneys’ fees. Employees may also recover penalties ($100 for an initial violation and $200 for subsequent violations) for failure to reimburse employee business expenses, under the Labor Code Private Attorneys General Act of 2004 (“PAGA”).
The DLSE generally accepts reimbursement at the IRS rate as a sufficient amount to reimburse all costs incurred by employees in using their vehicles for employer business. Although, employers are not required to use the IRS rate and may opt to use another method of reimbursement, such as a fixed monthly or weekly “gasoline allowance,” by using the IRS rate employers benefit from the presumption that employees have been fully reimbursed in the event of an employee claim to the contrary.(The IRS rate is calculated to include not only gasoline, but also wear and tear on the vehicle [depreciation], maintenance, repair and insurance costs.) The burden will then be on the employee to produce evidence (such as receipts) showing that the costs incurred in operating his or her vehicle was greater. If the employee is able to prove that reimbursement was insufficient to cover his or her actual costs, the employer must pay the difference.