Hey whats up,

I just started last week for a small local company that does regional northeastern runs. From what i understand, we get paid .25 per mile, along with a .05cpm per diem? I dont really understand this, i have driven for a few years and never really heard much about the per diem. what will this do for me, and should i start saving receipts to get the most out of my taxed money?

Another driver told me all that happens is that i gross less money, but i see a net pay a lot closer to my gross pay. like, if i make 700 gross, i'll see 650 or so net, instead of regular deductions taking it down to 550 or so. Is this true?

My girlfriend used to be in the military and she didn't like the sound of ther per diem. She was worried that i would end up having to pay money to the IRS at the end of the year, instad of getting a refund. However, i have searched on this board about per diem, and it seems like as long as i save my receipts and claim the 39$ dollar a day deduction, that i should still be getting back a decent refund?

All this is as clear as mud to me, any help would be GREATLY appriciated, at least to make the g/f happy!

Per Diem is the daily meal allowance transportation workers get to claim provided they "take a legitimate break AWAY from home." So if you return home each day you will NOT qualify for this.

For the upcoming year 2008 you will be able to deduct 80% of 52.00 per day (unless the government changes that figure) for the continental US. This means you take the standard deduction and DO NOT have to keep receipts for your meals. Understand that you must use either the standard deduction OR the actual amount (provided you have receipts to back up your claims of course). You cannot flip flop back and forth.

Now I suspect the reason your girlfriend does not like the per diem is the following;
1. You do in fact reduce your gross taxable earnings which may be detrimental in the event you are applying for a home loan where you want to show your making enough money to pay a mortgage.
2. You are contributing LESS to your social security and medicare (and your employer is getting away with not paying social security and medicare tax on the per diem allowance either).
3. In the event you are getting close to retirement your social security benefit will be based on your gross earnings (therefore your monthly check would be lower).
4. When filing your income tax return you will have to take the time to quantify 1st, how much your employer paid you for per diem, 2nd determine how many actual days you deserved to claim per diem 3rd calculate how much the government says you deserve (based on the number of days away from home duplicating your meal expenses) 4th, compare the governments figures with your employers figures and then adjust your itemizable deduction accordingly.

In other words, if your employer paid you TOO much in per diem pay then you will have to declare the overpayment as additional income and pay tax on that amount.

On the flip side if your employer paid you too little then you can claim the difference as an additional itemizable deduction.

Now in order for your employer to have a legitimate program for offering their drivers a per diem plan they must do a monthly audit to determine wether they are paying the appropriate amount as untaxed to their drivers. If your company does not do this then the IRS may (at its discretion) disallow the per diem plan and then you will have to pay tax on the untaxed money you already received throughout the year.


As you can see per diem plans have very little benefit (other than a slightly higher paycheck each week) and many ways in which it can bite you in the butt.

In my opinion per diems are scams designed to save your employer lots of tax dollars at your expense. They do this by taking the deduction which already belongs to YOU all year long.

__________________
Knowledge is Power