" Lets say I do 150 miles one day. 150 / 18mpg x 3.30$ per gal = $27.5 ... I dont even really need to do the other math to know theres a pretty big difference. But here it is 150 x .55 = $82.50"
While there are always short term examples where it doesn't work out. in the bigger picture, the idea is if the employee banks that difference they will have enough to buy the tires when needed, do the maintenance, etc. And if you had a car with better mileage, the difference is even bigger.
The Federal Rate is derived from a survey of rental car companies, for their total cost of operating a vehicle. They average across the spectrum of low mileage SUVs and the like to the higher mileage compact cars. Its usually a year rate, but in years when the fuel costs have been volatile, they'll make a mid year adjustment. Written agreements should be allowed to float with the rate rather than being a fixed number. Otherwise you have to keep adjusting the agreement.
For 2009 it was 55¢, 2010 it was 50¢, 2011 it is 51¢ till 6/30; then 55.5¢ from 7/1 to 12/31. It is considered all inclusive. Only a mileage log is required.
I realize you need the low mpg truck. The margin is less. You can always use "actual expenses" if it is more appropriate to your situation and everyone agrees. But the bookkeeping is a lot more intense. In addition to the mileage log which must still be kept as in the Fed rate plan, you'll have to keep track of actual expenses, fuel, oil, maiintenacne, insurance premiums and deductibles spent, etc. duh.
Both of these are considered "accountable plans". No reporting is necesary on the tax return. eazy peazy.
You really shouldn't pick and choose. And a flat dollar amount is the WORST. Everything must be reported on the return and any excess is considered taxable income.
