SECTION 4. BUSINESS STANDARD

MILEAGE RATE

.01 Use of the business standard mileage rate . A taxpayer may use the business standard mileage rate (published in an annual notice) to substantiate the amount of a deduction for an automobile that a taxpayer either owns or leases. A taxpayer generally may deduct an amount equal to either the business standard mileage rate times the number of business miles traveled or the actual costs (both fixed and variable) the taxpayer pays or incurs that are allocable to traveling those business miles (subject to the limitations in section 4.05 of this revenue procedure). .02 Business standard mileage rate in lieu of fixed and variable costs . A taxpayer computes a deduction using the business standard mileage rate on a yearly basis and in lieu of computing the fixed and variable costs of the automobile allocable to business purposes (except as provided in section 7.06 of this revenue procedure). Items such as depreciation or lease payments, maintenance and repairs, tires, gasoline (including all taxes thereon), oil, insurance, and license and registration fees

connection, substantiation, and returning amounts in excess of expenses. If an arrangement meets these requirements, all amounts paid under the arrangement are treated as paid under an accountable plan and are excluded from income and wages. If an arrangement does not meet one or more of these requirements, all amounts paid under the arrangement are treated as paid under a nonaccountable plan and are included in the employee’s gross income, must be reported as wages or compensation on the employee’s Form W–2, and are subject to the withholding and payment of employment taxes.

.09 Section 1.62–2(e)(2) provides that the amount of a business expense substantiated under § 1.274–5(g) is treated as substantiated for purposes of § 1.62–2.

.10 Under § 1.62–2(f)(2), the Commissioner may prescribe rules for treating an arrangement providing mileage allowances as satisfying the requirement of returning amounts in excess of expenses if the arrangement requires the employee to return amounts that relate to unsubstantiated travel miles, even if the employee is not required to return the portion of the allowance for substantiated travel miles that exceeds the deemed substantiated amount for those miles. The allowance must be reasonably calculated not to exceed the amount of the employee’s expenses and the employee must be required to return within a reasonable period (as defined in § 1.62–2(g)) any portion of the allowance that relates to unsubstantiated travel miles. Under § 1.62–2(h)(2)(i)(B), the portion of an allowance that relates to substantiated travel miles but exceeds the substantiated amount for those miles, and that the employee is not required to return, is subject to withholding and payment of employment taxes. See §§ 31.3121(a)–3, 31.3231(e)–1(a)(5), 31.3306(b)–2, and 31.3401(a)–4 of the Employment Tax Regulations.

.11 Under § 1.62–2(h)(2)(i)(B)(4), the Commissioner may prescribe special rules for the timing of withholding and paying employment taxes on mileage allowances.

.12 This revenue procedure modifies Rev. Proc. 2009–54 as follows:

(1) The standard mileage rates for the use of an automobile for business, charitable, medical, and moving expense purposes are now published in a separate annual notice. The notice provides the

amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate (see section 4.04 of this revenue procedure) and the maximum standard automobile cost for automobiles under a FAVR allowance (see section 6.02(6) of this revenue procedure). The Service plans to discontinue publishing this revenue procedure annually but will publish modifications as required. This revenue procedure remains in effect until superseded.

(2) Section 4.05(1) is modified to allow taxpayers to use the business standard mileage rate to calculate the amount of deductions for automobiles used for hire, such as taxicabs.