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

[sbatson]

Is per diem a good thing or what I see alot of up and down thoughts on this?

[BeauteousRot]

This was my first year of trucking. I did not take perdiem in my checks. It was FAR better for me to take it as an end of year deduction.

By taking an end of year deduction, and keeping only HALF of my purchase receipts, I knocked my taxable income down by half. I recieve half of my paid income taxes back as a refund.

This does not mean its better. You may need more money during the year, I did not. This is only my experience and I'm sure others will post on theirs.

[Twilight Flyer]

Keep in mind that Per Diem affects your taxable income, which in turn effects your long term social security benefits. If you have faith that social security in some form or another is going to be around when you retire, then plan on handing out little yellow smiley face stickers at Wal Mart if you take Per Diem.

Per Diem is really set up to benefit the employer, not the employee. They save plenty of money on company payroll and taxes if you take Per Diem. You get a few extra bucks in your pocket at the expense of possible retirement income from social security.

[Drew10]

I agree with TF he makes a very good point on not taking your perdiem in payroll. The gain in weekly income is small. I just claim the per diem at tax time.
The employer saves on what they pay you, in this case, per mile. The example I looked at assumed aprox .30cpm, taxed.
When employer gave the per diem in payroll it broke down to aprox.
.20cpm taxed
.10cpm (perdiem) untaxed. equaling the original .30cpm pay. aprox 1/3 of your cpm was untaxed (perdiem). This is where you gain in weekly income (marginal). Employer saves the .10cpm as this is your earned per diem.
Anybody have a better way to word it please help out, I think its a big ripoff to take it in your pay.

[coalregion]

If it were to benefit the driver, odds are very good it wouldn't be offered by most companies. :shock:

[VitoCorleone99]

The potential negatives have been discussed here ad nauseam, so I'm sure plenty of people will chime in on those. On the actual money involved though, per diem pay is 100% tax free. Per diem expenses are 75% deductible. If all other factors are equal, per diem pay will always mean more income over the course of a year, compared to the itemized deduction. The catch is that all other factors are almost never equal.

[headborg]

If it were to benefit the driver, odds are very good it wouldn't be offered by most companies. :shock:

LOL....because it hurts too much to cry...

So true, then to add insult to injury you have these companies that CHARGE the driver a .01- .015 cent per mile FEE to process it---can you say

WHAT THE---FUCX! BEND ME OVER--WHY DON'T YOU!


just make 2 columns and look at----WHAT THEY GET & WHAT YOU DON'T GETvsLESS TAX PAID IN

__________________________________________________ __________
I have to play Devil's Advicate here too----

If you owe Uncle Sam a Student Loan or something that can't be gotten settled by Bankruptcy--- and you're getting your WAGES garnished and/or
they are taking your Income Tax Refund anyway-----then yes---more the
per diem better....yes o'lord ....give me Big Per Diem!

[Drew10]

headborg wrote:

So true, then to add insult to injury you have these companies that CHARGE the driver a .01- .015 cent per mile FEE to process it---can you say

Mine company does that ....Like I said, Id just as soon keep it all and file the deduction at tax time.

Ive heard, some of the companies dont give the driver an option, you must take the per diem in payroll...Dont know how true it is.

[headborg]

headborg wrote:

So true, then to add insult to injury you have these companies that CHARGE the driver a .01- .015 cent per mile FEE to process it---can you say

Mine company does that ....Like I said, Id just as soon keep it all and file the deduction at tax time.

Ive heard, some of the companies dont give the driver an option, you must take the per diem in payroll...Dont know how true it is.

Yes true...some companies DON'T GIVE YOU a choice---now, How many of them ALSO charge you too???? Anyone, in that boat? Mandatory per deim + getting "charged" for it?

Lets see--- average 10,000 miles per month x 12= 120,000 miles x .o1=$1200 dollars a year to save YOU how much in taxes?

$1,800.00 a year if they are charging 1.5 cents per mile!


Come on man, pay me $1800.00 dollars -- I'll do a little paperwork for you. H&R Block lookout----Knight Transport is gonna put YOU out of business. How much does H&R Block charge to do your taxes?

[Rev.Vassago]

The potential negatives have been discussed here ad nauseam, so I'm sure plenty of people will chime in on those. On the actual money involved though, per diem pay is 100% tax free. Per diem expenses are 75% deductible. If all other factors are equal, per diem pay will always mean more income over the course of a year, compared to the itemized deduction. The catch is that all other factors are almost never equal.

This is verbatim from a trucking tax professional:

I just got the offical rules on getting over payment on your per diem.

If the companies deduct and pay per diem they must list it in Box 12 of your W-2 with the code "L".

If you should have a problem and have to draw SSI or Workers Comp it is based on the figure in Box 1.

If you want to get a loan that is based on the figure in Box 1 of the W-2

The amount will be added to your gross income and taxed at the rate you have.....THEN that amount will also be taxed as self-employment at the rate of 15.3% and added to your income tax.

I asked the IRS PERSON why they did not go after the company for this. HE SAID....because it is easier to go after the tax payer.....

[VitoCorleone99]

The potential negatives have been discussed here ad nauseam, so I'm sure plenty of people will chime in on those. On the actual money involved though, per diem pay is 100% tax free. Per diem expenses are 75% deductible. If all other factors are equal, per diem pay will always mean more income over the course of a year, compared to the itemized deduction. The catch is that all other factors are almost never equal.

This is verbatim from a trucking tax professional:

I just got the offical rules on getting over payment on your per diem.

If the companies deduct and pay per diem they must list it in Box 12 of your W-2 with the code "L".

If you should have a problem and have to draw SSI or Workers Comp it is based on the figure in Box 1.

If you want to get a loan that is based on the figure in Box 1 of the W-2

The amount will be added to your gross income and taxed at the rate you have.....THEN that amount will also be taxed as self-employment at the rate of 15.3% and added to your income tax.

I asked the IRS PERSON why they did not go after the company for this. HE SAID....because it is easier to go after the tax payer.....

Yeah, that's concerning overpayment. We had about a five page chat on that one a while back, didn't we? If you break the rules, the plan becomes non-qualified... yada, yada, yada. Comparing apples to apples - deducting 75% of $52 will never equal the tax savings of getting the $52 tax-free in the first place.

The lower loan qualification scores, SSI vs. Roth IRA, the reduced pay rates, and all the rest are a different story. My point is simply that people like to say they save more on taxes by itemizing, even if the pay is the same. They're wrong. The tax on 25 cents is more than the tax on nothing. Always. Without exception. Even if you're exempt from income tax, you pay your payroll tax starting with dollar one.

[Rev.Vassago]

Yeah, that's concerning overpayment. We had about a five page chat on that one a while back, didn't we? If you break the rules, the plan becomes non-qualified... yada, yada, yada. Comparing apples to apples - deducting 75% of $52 will never equal the tax savings of getting the $52 tax-free in the first place.

Not when you weren't supposed to get $52 in the first place. You end up having a tax issue on that extra 25% that you weren't entitled to deduct. Therein lies the problem. I'm sure the IRS won't be happy if they audit you and find that you received untaxed income and didn't report it.

[VitoCorleone99]

Yeah, that's concerning overpayment. We had about a five page chat on that one a while back, didn't we? If you break the rules, the plan becomes non-qualified... yada, yada, yada. Comparing apples to apples - deducting 75% of $52 will never equal the tax savings of getting the $52 tax-free in the first place.

Not when you weren't supposed to get $52 in the first place. You end up having a tax issue on that extra 25% that you weren't entitled to deduct. Therein lies the problem. I'm sure the IRS won't be happy if they audit you and find that you received untaxed income and didn't report it.

There's an apparent contradiction in what you're saying. If you're talking about the 25% difference, you're implying that the driver is entitled to the M&E deduction. If he's entitled to that deduction, he's entitled to the per diem pay (also $52). In a qualified plan, it's a reimbursement, not income.

It goes to line 12 if it's an overpayment and thus no longer part of the qualified plan. That's where the untaxed income issue comes up. If you're getting the $52 for days that you're not away from home, you've got issues. But then, you would likewise have those issues if you deducted the $52 for days that you weren't away from home.

[Rev.Vassago]

There's an apparent contradiction in what you're saying. If you're talking about the 25% difference, you're implying that the driver is entitled to the M&E deduction. If he's entitled to that deduction, he's entitled to the per diem pay (also $52). In a qualified plan, it's a reimbursement, not income.

You aren't taking into account that the driver only gets 75% of $52 as a standard meal allowance deduction. Usually, companies give the driver 100% of $52 as per-diem pay. The driver will have to claim that extra untaxed income.

Also, most companies don't take into account days in which the driver leaves home or arrives at home. On those days, the driver isn't entitled to the 75% of $52 standard meal allowance deduction, yet his company will likely give him his $52 per diem pay anyway.

The other major issue is that the driver is only entitled to the 75% of $52 if he earns enough taxable income to itemize. Since per-diem pay effectively reduces the amount of taxed income, the driver will likely have no choice but to declare the untaxed income on his tax return, or he won't be able to use the standard meal allowance at all.

There are serious tax implications involved here, and all it takes is one audit to bring them forth in a very negative way.

[headborg]

I still thinking it would be nice if I could find a couple hundred drivers-- that
will pay ME $1200.00 a year to give them .10 per mile(UNTAXED) of .10 per mile that I still would have had to paid them anyway(withholding that
tax).

Now, I've just made $1200.00 a year off their ass, plus now I don't have to hold on hand as much Payroll Tax for a whole quarter until time to Pay it/ file it. Solves some of my cash flow problems. Plus now I have an added deductible business expense--( giving my drivers what was already theirs).

My Balance sheet looks a lot better-- with less Payroll Expense.
My Unemployment Insurance Expense is less
My Workers Comp is Less

Now, If I can run these trucks until the warrent is up-- then find a couple suckers to lease it to-- and get it will pay for itself 5 times over-- and best part of all-- they will be taking all the risk of paying for the fuel.
Maybe I can get them to accept trip lease payment -- on a 1099 form.

[Rev.Vassago]

I still thinking it would be nice if I could find a couple hundred drivers-- that
will pay ME $1200.00 a year to give them .10 per mile(UNTAXED) of .10 per mile that I still would have had to paid them anyway(withholding that
tax).

Now, I've just made $1200.00 a year off their ass, plus now I don't have to hold on hand as much Payroll Tax for a whole quarter until time to Pay it/ file it. Solves some of my cash flow problems. Plus now I have an added deductible business expense--( giving my drivers what was already theirs).

My Balance sheet looks a lot better-- with less Payroll Expense.
My Unemployment Insurance Expense is less
My Workers Comp is Less

Now, If I can run these trucks until the warrent is up-- then find a couple suckers to lease it to-- and get it will pay for itself 5 times over-- and best part of all-- they will be taking all the risk of paying for the fuel.
Maybe I can get them to accept trip lease payment -- on a 1099 form.

Hey - gotta give those companies credit for knowing they can prey on the ignorant, as many truckers are.

[VitoCorleone99]

You aren't taking into account that the driver only gets 75% of $52 as a standard meal allowance deduction. Usually, companies give the driver 100% of $52 as per-diem pay. The driver will have to claim that extra untaxed income.

This is simply not true. I don't know how else to put it. Per diem, when taken as part of a qualified plan, is 100% tax free up to the $52 limit. The qualified plan is not considered the same thing as a "preemptive deduction." The driver is not responsible for tax on the last 25%. The deduction itself is subject to the 75% ratio.

In point of fact, a driver can receive say $40 in per diem pay (100% tax free) and then deduct 75% of the remaining $12.

Also, most companies don't take into account days in which the driver leaves home or arrives at home. On those days, the driver isn't entitled to the 75% of $52 standard meal allowance deduction, yet his company will likely give him his $52 per diem pay anyway.

This is true, and this is where the conversation of overpayment enters the equation. Drivers who receive payments to which they were not entitled run the risk of the 'non-qualified plan' issue coming up. Then they are on the hook for unreported income, payroll taxes, and the rest.

The other major issue is that the driver is only entitled to the 75% of $52 if he earns enough taxable income to itemize. Since per-diem pay effectively reduces the amount of taxed income, the driver will likely have no choice but to declare the untaxed income on his tax return, or he won't be able to use the standard meal allowance at all.

Per diem pay under a qualified plan does not require a driver to itemize, while the deduction would require the itemization. This is all the more reason for some people to consider taking a per diem option if there are no other factors making it unattractive. A driver can take the per diem pay, up to the limit, and take the standard deduction on his tax return. Per diem pay under a qualified plan is not income, and thus is not a deduction. Drivers who don't itemize benefit substantially that way.

There are serious tax implications involved here, and all it takes is one audit to bring them forth in a very negative way.

The only serious issue, in the context of this discussion, would be the overpayment. If a driver were on the road for ten days (not leaving or arriving home) and received more than $520 in per diem pay he would need to report the excess as income and the employer would need to withhold taxes.

[Rev.Vassago]

Good luck with that thinking. I'm sure the IRS will have a field day with it.



FYI: If you are out for 250 full days on the road, you are entitled to a $9750 standard meal deduction on your taxes. (250 X 52 X 75%).

If your company pays you $13,000 in per diem pay (250 X 52), that $13,000 will show up on your W-2 in box 12, Code L – Non-taxable reimbursements for employee business expenses. The issue, however, is that you are only entitled to a $9750 reimbursement. You would be responsible for paying tax on $3250.

Don't believe me? Wait until you get an audit.

A driver can take the per diem pay, up to the limit, and take the standard deduction on his tax return.

You're right - the limit, however, is $52 per day, and 75% of that amount (or $39 per day).


If what I'm stating was not the case, then companies would just pay everything as per diem pay, to avoid paying payroll taxes on it. There are, however, limits as to what they can get away with. The fact that they are even paying anything as per diem is entering an extremely shady area of the tax law. Really, they are using a loophole, and are using Code L for something for which it is not intended.

The fact still stands - companies should only be allowed to pay $39 per day as per diem (75% of $52), yet they pay $52 per day, and therefore the driver has $13 per day that he is receiving that he needs to pay taxes on.

[VitoCorleone99]

Well, you're just posting false information at this point. Publication 463 spells this stuff out in very clear terms, with very clear examples. People get a little confused because the numbers change, but in a nutshell:

(1)Publication 463 applies to everybody.
(2)We (transportation workers) can use $52 a day instead of using the $39 in non-listed areas and the alternate prices in expensive localities.
(3)We substitute a 75% limit where it says 50% limit.

Otherwise, it's all the same.

If your company pays you $13,000 in per diem pay (250 X 52), that $13,000 will show up on your W-2 in box 12, Code L – Non-taxable reimbursements for employee business expenses. The issue, however, is that you are only entitled to a $9750 reimbursement. You would be responsible for paying tax on $3250.

The IRS, in no uncertain terms, disagrees. Per diem pay is a reimbursement, which seems to be the part you can't get a handle on. No reimbursement is ever subject to the 50% (75% for us) limit. Reimbursements are not deductions. They are not taxable income. They are not non-taxable income. They are not unreported income. Reimbursements are not income. If your tax guy is telling you this stuff, I would find a new tax guy that knows what he's talking about. I suspect that he does know what he's talking about, as the first part you posted about overpayment was accurate. You can be reimbursed either using actual expenses or a daily rate. That daily rate is $52 for transportation workers. Over $52, line 12 would be used to recapture any money that wasn't paid back to your employer. The idea that being reimbursed more than 75% constitutes overpayment, however, is a figment of somebody's imagination.

Per Diem and Car Allowances
If your employer reimburses you for your expenses using a per diem or a car allowance, you can generally use the allowance as proof for the amount of your expenses. A per diem or car allowance satisfies the adequate accounting requirements for the amount of your expenses only if all of the following conditions apply.

Your employer reasonably limits payments of your expenses to those that are ordinary and necessary in the conduct of the trade or business.

The allowance is similar in form to and not more than the federal rate (defined later).

You prove the time (dates), place, and business purpose of your expenses to your employer (as explained in Table 5-1) within a reasonable period of time.

You are not related to your employer (as defined next). If you are related to your employer, you must be able to prove your expenses to the IRS even if you have already adequately accounted to your employer and returned any excess reimbursement.

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.

The high-low rate.

Allowance less than or equal to the federal rate. If your allowance is less than or equal to the federal rate, the allowance will not be included in box 1 of your Form W-2. You do not need to report the related expenses or the allowance on your return if your expenses are equal to or less than the allowance.
However, if your actual expenses are more than your allowance, you can complete Form 2106 and deduct the excess amount on Schedule A (Form 1040). If you are using actual expenses, you must be able to prove to the IRS the total amount of your expenses and reimbursements for the entire year. If you are using the standard meal allowance or the standard mileage rate, you do not have to prove that amount.

Example 1.

In April, Jeremy takes a 2-day business trip to Denver. The federal rate for Denver is $176 per day. As required by his employer's accountable plan, he accounts for the time (dates), place, and business purpose of the trip. His employer reimburses him $176 a day ($352 total) for living expenses. Jeremy's living expenses in Denver are not more than $176 a day.

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.

According to everything you have written to this point, "Jeremy" would be subject to the 50% limit and he would owe taxes on the excess $176. The IRS says you're wrong. I guess we can go back and forth all day, but I've said my piece. If people want to overpay on their taxes, good for them.

[Rev.Vassago]

Allowance less than or equal to the federal rate. If your allowance is less than or equal to the federal rate, the allowance will not be included in box 1 of your Form W-2. You do not need to report the related expenses or the allowance on your return if your expenses are equal to or less than the allowance.

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.

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.

Example 1.

In April, Jeremy takes a 2-day business trip to Denver. The federal rate for Denver is $176 per day. As required by his employer's accountable plan, he accounts for the time (dates), place, and business purpose of the trip. His employer reimburses him $176 a day ($352 total) for living expenses. Jeremy's living expenses in Denver are not more than $176 a day.

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

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.

According to everything you have written to this point, "Jeremy" would be subject to the 50% limit and he would owe taxes on the excess $176. The IRS says you're wrong. I guess we can go back and forth all day, but I've said my piece. If people want to overpay on their taxes, good for them.

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