Per Diem Do or Don't??????

[bigtimba]

. . while not intending to hijack the thread I think those who have made it this far in the thread ought to know . .

Are you paying state income taxes to a state in which you really don't live? I mean it may be your home state but do you really live there?

I'm "from" Maine but for the purposes of employment I'm from Washington, which is state income tax free (WA, NV, TX, FL, NH and a few others . . ). I save money on cash flow (no deductions) and earn a real net gain of $900-1200/year, the difference between what I would have paid and then have refunded.

If you own real estate or have a spouse and/or dependant children at home you are kind of locked in to paying. If, like me, you have the option of living wherever you'd like, get a PO box and have your license transferred to a tax free state.

To stay on topic . . don't take the per diem.

[VitoCorleone99]

Publication 463 supports exactly what I have been stating. The "allowance" has to be less than or equal to the federal rate. The federal rate for truck drivers is $39 (pull out your calculators, and multiply $52 times 75%). If the allowance by the carrier is greater than the federal rate, then you have untaxed income. PLAIN AND SIMPLE.

That's where your imagination has gotten the best of you. The federal rate is not $39. 75% of the federal rate is $39. The federal rate is either ($39 in unlisted localities and a higher amount in listed localities) or ($52 everywhere). I'll show you again:

The federal rate. The federal rate can be figured using any one of the following methods.
For per diem amounts:

The regular federal per diem rate.

The standard meal allowance. (Does this mention any 50% limit?)
The high-low rate.

By your logic, a carrier could pay an employee everything through per diem, and the employee wouldn't be required to report any income. That is just laughable.

Read the big ass bold letters you just quoted: "less than or equal to the federal rate."

The example provided does not state if that $176 per day is before or after the 50% allowed (75% for truck drivers)

No, it states that the federal rate for Denver is $176 per day. This is where you're logic unravels right in front of you. Some of us actually read the rules (like Publication 1542, which points you to gsa.gov, not that you intend to read any of it), where we would find that the federal rate (not 50% of the federal rate) is $176 for Denver. Anyone wanting to use that rate for a deduction would be subject to the 50% limit. But, as the folks from the IRS just told you, "Jeremy" gets the full amount tax-free under his per diem arrangement and his employer does not report it on his W-2. Look down there...

Jeremy's employer does not include any of the reimbursement on his Form W-2 and Jeremy does not deduct the expenses on his return.

Now, I'll ask you this - what if Jeremy's employer "reimbursed" him $250 per day?

That would not be less than or equal to the federal rate, now would it? Shocking as it may seem, this too is addressed in Publication 463. Those pesky feds do spend a lot of time writing rules. In fact, in addition to spelling out the rules, they put a pretty little table near the bottom. It sounds to me like your scenario would be:

Per diem or mileage allowance exceeds the federal rate: Adequate accounting up to the federal rate only and excess not returned.

If thate's the scenario you are trying to envision, you would do what it says in the table:

The employer reports on form W-2: The excess amount as wages in box 1. The amount up to the fedral rate is reported only in box 12. - It is not reported in box 1.

The employee reports on form 2106: All expenses (and reimbursements reported on form W-2, box 12) only if expenses in excess of fedral rate are claimed. Otherwise form is not filed.

Essentially the excess gets treated as income and if you want to claim it, you have to do so as a deduction.

If the plan is considered nonaccountable (which takes us back to the earlier discussion), the amount is all line 1 wages and all taxable.

[Rev.Vassago]

.Are you paying state income taxes to a state in which you really don't live? I mean it may be your home state but do you really live there?

You pay state income taxes in the state you reside.

I'm "from" Maine but for the purposes of employment I'm from Washington, which is state income tax free (WA, NV, TX, FL, NH and a few others . . ).

:shock:

If, like me, you have the option of living wherever you'd like, get a PO box and have your license transferred to a tax free state.

I'm curious - how do you get a license with only a PO Box? What do you use for your residence address (which is required for a license)?

To stay on topic . . don't take the per diem.

Smart words. :wink:

[Rev.Vassago]

Read the big ass bold letters you just quoted: "less than or equal to the federal rate."

So tell me: What is the federal rate?

[VitoCorleone99]

If, like me, you have the option of living wherever you'd like, get a PO box and have your license transferred to a tax free state.

I'm curious - how do you get a license with only a PO Box? What do you use for your residence address (which is required for a license)?

I know a couple of CFI guys use a UPS store in Texas as their physical address. Apparently you get an actual street address so everything works out.

[Rev.Vassago]

If, like me, you have the option of living wherever you'd like, get a PO box and have your license transferred to a tax free state.

I'm curious - how do you get a license with only a PO Box? What do you use for your residence address (which is required for a license)?

I know a couple of CFI guys use a UPS store in Texas as their physical address. Apparently you get an actual street address so everything works out.

Somehow, I think the IRS would disagree if they were to do an audit.

[kips41]

VitoCorleone99 is correct with his information. The the Rev is confusing the Meal Allowance deduction and applying those rules to Per Diem which is a totally seperate item.

Employers can reinburse employees for expenses under an "Accountable Plan" and this is not income. The IRS states that an employer may use the standard meal allowance for the Per Diem paid and that you and your employer can use the Per Diem by itself as proof of the expenditures. Meaning that you do not have to save receipts and turn into your employer.

You will only run into a problem when the Per Diem rate paid by an employer is higher than the standard meal allowance. Therfore companies will only pay $52 per day for per diem. If you read page 30 of Pub 463 this should clear up any questions.

Now you can claim being away from home as long as you take the "mandated" rest break during the day. So you can claim a day that you are arriving or leaving home so long as you take a rest break...this is talked about in detail in Chapter One of the publication.

This is a very complex issue and everyone should consult their tax professional for what is best for them.

If you do not have enough to itimize equal to the standard deduction without using your work related expenses you are losing the tax savings on the difference by not taking the per diem and in addition to paying 7.65% in Social Security taxes on all the Per Diem amount, if you elect to not take the Per Diem.

Now by taking the Per Diem you will affect many other items. You will need to evualvate you own situation.

[Rev.Vassago]

VitoCorleone99 is correct with his information. The the Rev is confusing the Meal Allowance deduction and applying those rules to Per Diem which is a totally seperate item.

I'm not confusing anything. I know exactly what per diem pay is, and i know exactly what the standard meal allowance deduction is. Both are completely related.

Employers can reinburse employees for expenses under an "Accountable Plan" and this is not income. The IRS states that an employer may use the standard meal allowance for the Per Diem paid and that you and your employer can use the Per Diem by itself as proof of the expenditures. Meaning that you do not have to save receipts and turn into your employer.

Wow. That's a complete rehash of information already given ad nauseum.

You will only run into a problem when the Per Diem rate paid by an employer is higher than the standard meal allowance. Therfore companies will only pay $52 per day for per diem. If you read page 30 of Pub 463 this should clear up any questions.

Again - what is the standard meal deduction that the per diem is supposed to be based off of???

Now you can claim being away from home as long as you take the "mandated" rest break during the day. So you can claim a day that you are arriving or leaving home so long as you take a rest break...this is talked about in detail in Chapter One of the publication.

Wrong.

This is a very complex issue and everyone should consult their tax professional for what is best for them.

Of which you aren't one.

[kips41]

I'm not confusing anything. I know exactly what per diem pay is, and i know exactly what the standard meal allowance deduction is. Both are completely related.

You need to take the time to READ publication 463. They are not related.
The meal allowance is a deduction. Per Diem is a reinbursement.

The reinbursement is totally non-tax and the deducation is only an advantage if you can itemized above the standard deduction which most driver scan't do without using their businesses expenses to do so. Therefore they are better off to take the combination of per diem and the standard deduction, which in 99.9% of the case is more than trying to itemized all of this on Form 2106 and on Schedule A.

Again - what is the standard meal deduction that the per diem is supposed to be based off of???

AGAIN, you need to READ Publication 463 from the IRS. It clearly states what an employer can use to base the Per Diem on and the Standard Meal Allowance is one of them.

This is not something that we are pulling out of our butts, by the way this is fully covered on PAGE 30, if you take the time to READ.

YOU are not a tax expert either, but at least I have enough sense to tell drivers that they need to get with a tax professional to look their personal situation.

By the way , my daughter is a CPA, has her Masters in Accounting from Louisiana State University and works in the TAX department of the firm where she is employed.

[Rev.Vassago]

Wow.

[bigtimba]

. . perfectly legit and adequate. There is no requirement to maintain a physical address, anywhere.