Business Vehicle Program - Flat Allowance
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The document outlines the pros and cons of business vehicle allowance programs, highlighting their simplicity and equity issues. It contrasts flat allowances, which can lead to tax burdens and inequitable reimbursements for employees, with the Runzheimer plan that offers a more accurate, tax-free reimbursement based on actual driving conditions. The Runzheimer program blends fixed and variable costs to provide fair reimbursements tailored to geographic variations, catering to companies with mobile workforces.
Business Vehicle Program - Flat Allowance
- 1. BUSINESS VEHICLE PROGRAM FLAT ALLOWANCES # of drivers on an allowance plan 100 $ a month per employee $500 average miles per employee per year 12,000 total annual employee tax waste Flat Allowances by the Numbers $180,000 WE WORK WHERE YOU WORK.™ Business Vehicle Programs are designed to meet different business needs. As those needs change, organizations need to be flexible by not locking themselves into one specific program. According to a World at Work survey underwritten by Runzheimer, 64 percent of companies use two or more programs in tandem. The best solution is dependent on what works best for your company and your mobile employees. Business leaders need to understand the fundamentals of the different types of available business vehicle programs to make an educated decision. The following is an overview of an allowance program, why organizations choose them, and a financial comparison to an alternate, tax free program. Allowances are best suited for organizations that want simplicity and are not concerned with the tax burden. Most employees perceive flat allowances to be a fair reimbursement method because these programs are so easy to understand, administer and all participants receive the same amount. The reality of an allowance plan is that infrequent drivers are over reimbursed for business driving and your road warriors are under- reimbursed—making an allowance program inequitable. Allowances are also considered a form of compensation, not an expense, creating a tax liability for both the employer and the employee. If an employer wants their employees to net a certain dollar amount, they will need to tack on a significant cushion of up to 30 percent to account for taxes. Allowances are fixed amounts that often don’t represent a particular traveler’s driving habits, such as the number of miles they log or their local fuel costs. They are also taxable for both employers and employees. Allowances can be treated as an extra benefit for employees, functioning like a bonus. Because of this, employers are often hesitant to move to a more fair and equitable program for fear of “unhappy employees.” Once you do the math, however, the answer seems pretty simple. WHY USE AN ALLOWANCE? CONSIDERING ALTERNATIVE OPTIONS
- 2. Runzheimer, a business vehicle technology, and solutions provider is the recognized leader in mobile workforce management. We help organizations increase agility, reduce costs, and improve satisfaction through fair, accurate and defensible™ reimbursement programs. Our solutions deliver an effortless experience for employees while providing data, visibility and actionable intelligence for managers and executives. We understand the mobile workforce is driven by data. Our technologies integrate with your big data tools—building on and enhancing the systems you have in place today. It is our mission to offer mobile technology and solutions that connect people, companies and their vehicles to drive superior productivity and valuable business intelligence. We work with our customers to ensure their needs are always met, and we remain dedicated to surpassing their expectations. info@runzheimer.com 800.558.1702 runzheimer.com Copyright © 2017 Runzheimer If you have an allowance program in place and want to see if you qualify for a tax free program, schedule a complimentary program assessment with one of our business consultants. The tax implications of a vehicle allowance put a significant burden on the employee. In the example shown at left, an employee only receives about $335 of a $538 vehicle allowance after taxes are applied. If you have a mobile employee base that is geographically dispersed and drives more than 5,000 business miles a year, it is wise to consider a tax free program like the Runzheimer plan. The Runzheimer Plan, or fixed and variable rate reimbursement, is widely considered a “best of breed” program that blends the fixed costs of operating a vehicle with geographically specific variable expenses (such as fuel) to produce highly accurate reimbursements. Fixed and variable rate programs are the fairest, most targeted option for any organization, regardless of company size. Participants in the Runzheimer Plan receive a fixed sum which is designed to cover insurance, taxes, depreciation and registration. Employees are also granted a variable cents-per-mile reimbursement scaled to the price of gas locally, which accounts for the cost of fuel, maintenance, oil, tires and other incidental expenses. This structure allows employers to provide fair and accurate reimbursements based on where mobile employees live and work. Want to calculate your company’s potential savings? Click or visit the link below to learn more. https://app.snapapp.com/Allowance-Assessment FAIR, ACCURATE AND IRS COMPLIANT™ UNDERSTANDING THE ROI WHAT NOW? $200 $0 Cash in Driver’s Pocket Income Tax FICA/FUTA $400 $203 tax waste Vehicle Allowance Runzheimer Plan $335 $335 $165 $38 $538 Total $335 Total Jeff Warrensford Major Market Consultant Direct: 678-468-6934 & JSW@Runzheimer.com