The payment by the LLC would be deductible but limited due to the nature of the meals and entertainment rules. This means it would be subject to the same restriction as the driver on the subject of 80% deductible. Not a problem, but doable without looking further into it.
Second proposition is out.
The trucker received a monetary contribution toward these expenses. Therefore in order to deduct them, it has to be declared as income.
In order for the LLC to have the ability to do this it would be best to have a plan in writing. Such a plan then negates the ability of the driver due to the fact there is no money spent by the driver for the deduction as allowed.
IRS announces that per diem rate remains unchanged for 2009
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Just as I reminder, to anyone planning to get a home loan anytime soon, all of your unreimbursed expenses are deducted from your gross income to come up with "how much you make" in order to qualify for a loan. This even includes your charitable giving. It can severely cut your buying power if you deduct a lot and/or make a lot of charitable contributions.
In actuality the $52 meal deduction (or whatever - $59) is equivalent to receiving a tax free per diem check for the same amount, with the one minor exception that a per diem check gets you the tax benefit right away instead of having to wait until tax time. That's not a very big difference. There are a lot of other per diem factors that really screw the driver over, that you didn't touch.
Drivers who receive per diem pay who do not have enough other deductions for it to make sense for them to itemize, get to receive BOTH the benefit of the standard meal deduction (in the form of per diem pay) AND the standard deduction. This little-mentioned fact amounts to roughly $1000/year in tax savings for drivers who receive per diem pay, give or take a few hundred dollars.
It's important to keep in mind that this only applies to a small percentage of drivers (10% at best), and the numerous drawbacks to per diem unfortunately outweigh this thousand-dollar bonus. For nearly 100% of drivers, the per diem method is worse than deducting at the end of the year.
If the driver forms an LLC or corp. and pays per diem to himself the plan will not meet the IRS requirements for Plans that allow the employee to use the allowance ($59/day) as proof for the amount of the expenses.(That is because the employee is more than 10% owner of the employer.)
And as Roadmedic said the LLC can deduct 80% not 100%
If the driver has some other income (from driving or otherwise say wifes salary) He will have no problem deducting the standard or the itemized deduction whichever serves him best.
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