From what I've been reading per diem in trucking is nothing like per diem in other industries, so I want to make sure I get this understood correctly.
Per diem as I know it:
Is an additional negotiated income stream over and above an already negotiated fee for work to be performed. Example: If I charge $10.00 an hour to perform a service I may also have a per diem charge to cover my expenses. I would normally charge this for travel expenses etc. Let's say I charge a per diem of $20.00 per day. So for an 8 hour day I would make $100.00 ($10.00 x 8 = $80 + $20.00 per diem).
This amount would be paid in full, with no taxes deducted - in actuality no taxes would be taken out of my service fees either but for the sake of this post we'll just focus on the per diem.
That's how I understand it.
Per diem in trucking:
Now in trucking from what I've read- drivers are paid either by the mile, % of load or by the hour depending the company etc.
Let's use cpm for my example so as not to complicate this more than necessary...
A per diem in trucking as I understand it causes the negotiated income stream of let's say .28 cpm to be reduced based on the per diem amount given - do I have this correct?
Also, if I understand this correctly - the per diem is not taxed and the driver would receive a 1099 in January of the following year - Correct?
If I am correct in both of these then I am not understanding what the issue is in receiving per diem as opposed to full cpm?
If you receive a 1099, you get to write off more on your income taxes - basically you become a business making almost everything you do become tax deductible. So, all those meals, extra supplies, down time etc all become deductible at a higher rate than if you filed only w2 income.
Am I missing something?
I understand some may want the higher net pay today, rather than wait for tax season - but in the long run it appears to me you could/would be taking home more if you were able to file not only on w2 but also on 1099.
Thanks as always in advance
Ok, per diem - as I understand it...
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My understanding is that per diem lowers your taxable income, at the "expense" of earning less income on paper (lower social security... may have issues getting larger loans since on paper you may lack the capacity to pay it back). if you take per diem, i wouldn't expect you to be able to write off meals or lodging - that's what per diem is for.
You don't earn less on paper. If the per diem is part of the pay as a company driver that still shows on your W-2. It's not taxed obviously and not part of your gross but is listed separately on the W-2 so it's not some mystery money no one sees. The big problem is the lower money paid into social security.
There is not a 1099 involved. The "per diem" pay is a non taxable payment for expenses normally covered by the "per diem" tax deduction.
You can't have it both ways. You can't deduct meals and take either a per diem payment or a per diem deduction.
And it lowers your income, for a lot of other purposes besides taxes.
The thing that winds up biting most people is the income calculations for workers comp. If you fall off the truck and break your arm, the workers comp payment will be calculated from the lower taxable income. And if the lower income falls below the minimum wage amount for a forty hour week, you may be classified as a casual worker, and casual workers are not eligible for wage replacement. And then you have 6-8 weeks of no income.
And you don't really save any money. The "per diem" pushes almost everyone into itemized deductions. And all the other stuff becomes deductible, even for company drivers.
The company saves money though. Lots of it.
Lower payroll taxes, lower workers comp, lower life insurance. Etc.
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you r classified as tempoary when away from home. if company gives u a per deiem each day is deducted from federal standard rate. if ur comp. gives u a 15.00 allowance for food. at end of year the itemized deduction is 50. u deduct the 15 from the fed rte and that gets subtracts from the taxes u pay for at end of year. hope this helps
I would never take company per diem. First it lowers your claimed income which means you can't claim it as income when you apply for a loan. It also lowers your ss, unenjoyment compensation, and workmens comp, and it has no other real benefit to you in the long run. The standard deduction you can claim is $59/day you are away from home and you can claim 75% for partial days away from home. You still get the deduction on your taxes but you get to claim all of your income as income for financial purposes.
Company deducted per diem only benefits the company, NOT the driver.
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