Amid surging gas prices, the Internal Revenue Service today implemented a rare midyear adjustment to its allowable vehicle reimbursement rate for the remainder of 2005 to 48.5 cents per mile-8 cents higher than the rate for the first 8 months of this year. The rate is effective immediately.
Although IRS typically adjusts its annual mileage rate in the fall for the following year, the government agency is breaking precedent not only with the midyear adjustment but also by waiting to determine the 2006 rate. "With many predicting a decline in gas prices over coming months, we will hold off on setting the 2006 rate until closer to January," IRS Commissioner Mark Everson said in a statement.
National average gas prices this year steadily have grown and the effects of Hurricane Katrina this month have helped exacerbate already surging fuel costs. According to data published by AAA, the cost per gallon in the United States today averaged $2.97, compared with $2.41 a month ago and $1.84 a year ago.
According to results from
Business Travel News' first annual Expense Managers Survey
(BTN, Dec. 6, 2004), 82 percent of 236 expense managers said they use the IRS fixed safe harbor rate when reimbursing drivers. IRS on Jan. 1 upped its rate to 40.5 cents per mile from 37.5 cents for 2004. The rate increase largely was due to higher gas prices throughout 2004.