Per Diem Do or Don't??????
 

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

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.

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.

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.

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

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.

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!

headborg wrote:
Mine company does that :roll: ....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?

This is verbatim from a trucking tax professional:

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.

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.

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.

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. :lol: :lol: :lol:

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.

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.

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.

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.

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. :roll:

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.

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.
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.
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.

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. :roll:



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

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

And while we're on the subject of taxes . .
 

. . 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.

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



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

Re: And while we're on the subject of taxes . .
 

You pay state income taxes in the state you reside.

:shock:

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)?

Smart words. :wink:

So tell me: What is the federal rate? :lol:

Re: And while we're on the subject of taxes . .
 

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.

Re: And while we're on the subject of taxes . .
 

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

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.

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. :roll:

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

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

Wrong.

Of which you aren't one. :roll:

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, 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.

Wow. :lol:

The PO box is . .
 

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