![]() High-mileage drivers tend to be overcompensated for their travel, whereas low mileage drivers tend to be under-compensated. Since no two vehicles cost exactly the same to own and operate, reimbursing equal sums to every driver leads to inequity. It is suboptimal for companies who require employees to drive daily for business. For this reason, employers often transition to fixed and variable rate (“FAVR”) programs.ĬPM is chiefly useful for reimbursing employees that drive occasionally. ![]() Fuel prices change far more regularly than do the suggested rates, and different vehicles in different cities cost various amounts to insure. In practice, cents per mile programs do not perfectly reflect these fluctuating costs. Insurance, depreciation, fuel, maintenance, tires-these expenses are all meant to be captured by the suggested CPM rates. Disadvantages of CPMĬents per mile is not the only option for a business vehicle program.ĬPM is meant to reimburse drivers for a variety of costs associated with purchasing and operating a vehicle. This is done because organizations do not want reimbursements to become covert income payments. Any amount paid beyond that figure is assessed for both payroll and income tax. The rates suggested by the IRS and the CRA are the maximum values that can be repaid to employees before the reimbursement is assessed for tax. Below you can see a history of each organization’s recommended rates. In Canada, the CRA rate for 2021 is 59 cents per kilometre (for the first 5000 kilometres-53¢ per mile after that). In 2021, the IRS standard rate for reimbursements is 56 cents per mile. Then they reimburse drivers according to the standard rate set by the relevant tax authority. They must accurately log the miles driven by every employee, including the purpose of the trip and destinations. To institute a CPM program, employers need to empower their employees to use their own vehicle for work. ![]() For those reasons, employers opt for CPM. The former is expensive and administratively burdensome the latter is subject to income and payroll taxation. Some enterprises operate on fleets of company-owned or leased vehicles others pay flat rate car allowances to employees to supply and drive their own car. Is cents per mile a good reimbursement program? The IRS and CRA both set optional standard mileage rates in cents for employee vehicle reimbursements. Using the Cents per Mile (“CPM”) rate, companies reimburse their employees who use their personal vehicle to drive for business purposes. Or get GOFAR today and start counting your tax-return blessings.What is a Cents per Mile mileage reimbursement? Interested? Learn more about how GOFAR can benefit you. The logbook method requires more record keeping BUT allows you to claim unlimited km for work purposes. ![]() If you are doing more than 5,000km per year for work purposes you may want to check out the logbook method. The cents per km method is simple and great for those doing less than 5,000km of work travel per year.
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