OK MY G/F WHO HAS BEEN DRIVING FOR ALMOST 4 YRS SAYS DONT TAKE PER DIEM I DONT UNDERSTAND WHY OR SHE CANT EXPLAIN IT THROUGHLY ENOUGH SO PLEASE SOMEBODY EXPLAIN THE PROS AND CONS IF I DONT TAKE IT DO I GET ALL THAT MONEY BACK ON TAXES I CANT BELIVE I WOULD THATS LIKE 16,000 A YEAR SO IM LOOKING FOR SOME EXPLAINATIONS HERE ANY HELP WOULD BE APPRECIATED THANKS... KEN

 

In a nutshell, the per diem option moves part of your wages out of the 'income' category and into the 'reimbursement' category. The knee-jerk reaction from most drivers will be to tell you it's a screw job.

In reality, you would be hard-pressed to find an example where you make less by taking the per diem option. What you give up is any type of benefit tied to your wages. Your Social Security contributions (and the employer's match) will be reduced. Your 401(k) contributions (and the employer's match) will be reduced. If you get a week's or two week's wages for vacation, those amounts will be reduced.

The general sentiment that drivers seem to express is that they would rather just take their deductions at the end of the year, as they think that will provide them with more income. This sentiment is simply reflective of a lack of education on the topic. Deducting 80% of a dollar will never provide as much money as receiving the dollar tax-free. If your deductions would be more than your per diem reimbursements, you can still deduct the difference.

Whether or not one should take the option is a personal decision. 90% of the time, the per diem route will provide greater income, but you have to get out a calculator and figure out if you would be able to save enough to offset Social Security, 401(k) match, and the rest of it.

 

read this. it should explain everything
http://www.landlinemag.com/Archives/...r_business.htm

 

What you fail to take into account is that most companies offer you the per diem only if you take less pay per mile, so it usually isnt a great deal after all. you really need to talk to a financial advisor since everyones situation is different, read the article I suggested, it will help you make an informed decision. and always feel free to ask our opinions here, we will tell you even if we dont know.

 

Actually I didn't fail to take anything into account. The fact that every company's pay structure is different and every individual's needs are different is exactly why I said you have to get out a calculator and see for yourself. Starting with a basic assumption regarding annual mileage, you can put the two choices side-by-side and contrast them.

Further to that, the calculation would need to involve the standard tax deduction. By taking the M&E, we lose that option. By taking the per diem, depending on other individual factors, it may be possible to get the full tax-free amount of money, and still take a few thousand dollars more as a standard deduction. Back to the calculator.

Further to that, some people file joint tax returns with a spouse. The impact of the spouse's income and tax situation would determine whether the federal tax itself was 10 cents on the dollar or 38 cents on the dollar. Back to the calculator.

The list goes on and on. Articles like the one you linked imply that, because the per diem is good for the company, it's likely not good for the employee. Things in life are rarely that simple. I do agree that a financial advisor (if he's worth the fee) should be able to walk you through these things. Then again, I might be biased because I was a financial advisor. 8)

 

GOOD ARTICLE VERY INFORMATIVE I HATE WHEN SHES RIGHT!!!LOL.
AND THANKS FOR THE QUICK REPLY

 

Vito, very good explaination but you didn't mention one thing, with the per deim, beause your reported income appears to be less it can effect your ability to get a loan. It looks like you made (just say) $10,000 or so less than you really did!

 

Look, when a company tells you how great it is for you, then it probably isn't.

 

I agree that it "can" make a difference, but in most cases it probably won't. When you get your W-2 at the end of the year it will have another box marked additional income or reimbursed expenses, this is where your per-diem pay will show up. According to the manager at my bank, this is income and he would count this as income should I ever need that to secure a loan. This may vary from bank to bank, but my guess is that your showing them a box that states that this was income you received, most would and should count it as such.

This topic has been beat to death in here and other places. Land Line offers some pretty earth-shattering info in their assumption that it is good for the company... Duh, if it wasn't they most likely wouldn't offer it. My experience is that it works out great for me also. If you talk to a CPA or financial advisor who gives you the knee-jerk reaction that it's always a bad deal for the driver without even looking at your individual situation, my advice would be to find another CPA. I take per diem and don't pay a dime of tax on it. As a matter of fact, I am able to deduct even more than I collected as per diem. Not everyone can do this though, because we are definitely not in the same boat. Bottom line is that it's not always the evil that some will lead you to believe that it is.

 

The easiest way to explain per diem is this.

If you believe in social security and think it will be around to help you out in your old age, steer far clear of per diem. If you do not think social security or any type of new old age plan will be around to help you in your old age, then go for it. It's a gamble, either way.

Personally, I would steer clear of it. I know of no companies that offer per diem without hatcheting your pay rate in the first place. And if you take it and social security is alive and well when you're old, plan on handing out little yellow smiley stickers as a Wal Mart greeter when you turn 65.