Per Diem is Great...

from other posts, mileage rates are a screwy mess. The best way to do it is based on logged days away from home. The rate just went up on Oct 1st to $59 per day, but as before only 80% is deductable, so $47.20 per day is the allowable tax free per diem.

 

As of Oct 1st the per diem rate went up to $59 per day, but as b4 only 80% is deductable. If you have days in Canada you can deduct 80% of $65.

 

Thanks, that is actually what we are looking at, but one question: is the 20% off whatever the employer offers or off the IRS rate?

I would like to set it up so what we give the drivers will not be taxable to them at the end of the year. We have good drivers and I respect the heck out of them, so I don't want to set up anything that will bite them in the end.

 

If you want to respect your drivers-why do the per diem at all. It only benefits the company and hurts the driver. I am curious......

 

Ok, so I have to ask.. I've read all the per-diem stuff and I understand it and believe me, I don't want it. So here is my question.. For all us new drivers starting out, would it be just easier to take the per-diem for a year? To get the experience and move on, or have that changed? It's pretty obvious, that MOST companies, if not all, would penalize you somehow for not taking the per-diem since it helps them out. It just seems to me that for starting drivers, we should probably take the per-diem to get going in the industry and then make a decision once we have experience whether or not we want to keep it. If we say no to per-diem now and lose miles or our jobs because of it, then it wasn't really worth the few extra dollars or any amount of money if you aren't making any at all.

Am I wrong on this? I would like to hear some opinions. Thanks guys/gals

 

Lets say for instance in a week I earned $1,000 with no per diem. That would be about $750 after taxes. I know this because I looked through old pay stubs from earlier in the year. Now lets say I earned $1000 including $200 per diem. (Most companies that pay a per diem do something like 40cpm including 8cpm per diem) I only paid taxes on $800 which comes to about $625ish after taxes. The other $200 is paid as an expense reimbursement. So what happened is I cashed a paycheck for $825 instead of the $750 I would have had if I had paid taxes on the full $1000. This is a good thing in the short term. The long term effect is that your FICA withholding is smaller (based on $800 instead of $1000) so it adversely affects your Social Security benefits. Also, if your company has 401(k) your contribution (and your employer's if they match) is smaller because its also based on taxable income. Some companies calculate vacation pay based on average weekly earnings over a specific period of time. Those that do will most likely only figure your taxable income in the calculation. So now your vacation check went down as well. So the short term benefits are good but depending on your circumstances, the long term adverse effects may outweigh the positive short term.

If you do take a per diem, don't even THINK of itemizing or taking a standard deduction. You can only deduct expenses that your employer does not reimburse, and per diem means that they "reimbursed" you for meals, entertainment (do lot lizards count??) etc. So its a big red flag.

As for having a PO box, that's a red flag as well. Better off to have a real bricks and mortar address because if you get audited they will argue that you are actually living in the truck. Either that or you better have really tiny furniture!

 

If you are going to offer a per diem, PLEASE make it optional. And "opt in" instead of "opt out". Per diem has short term benefits (bigger net paycheck) but long term detriments (smaller FICA and 401(k) contribution) and not every driver is interested in it.

 

Absolutely. The last few times I have been to orientation- they would just sit there with a big grin telling you how great Per Diem was. I would keep hammering them with questions and my input on how it screws up my accounting and saves them taxes. I did work for one company where you had no choice-but I really wanted to run regionally so I didnt fight it.


On a side note outside of trucking I have been paid per diem and it was quite well paying.

 

It really depends on how the Perdiem is done as to if it hurts the drivers.
If you offer perdiem but will lower there normal rate, then it is not helping them. Sure they will have more money in there pockets each week, but they will actually be getting paid less per mile.
If a company really wants to help there drivers with it they will pay the same amount per mile as before and do the perdiem on top of that. Anything less than the 47 a night out will not be taxable for them at the end of the year, if it is turned into the IRS properly as a reimbursment.

There are companys that do this by the way. I have looked into a few lately that pay a good per mile rate and 30-47 dollars a day perdiem on top of it.
Sure, the driver cannot claim there full perdiem at the end of the year, but they have a whole lot more money in there pockets all year. And whatever part of it that was not paid out to them during the year they can still claim as a writeoff.

Doing it this way will not really help the company save any money though. I think the company can write it off, but they still end up paying all the taxes they did before. Where it helps is in keeping drivers. The company will get all this money back at tax time, and the driver will be much happier all year with there pay, so you will increse driver retention.
Not many companys do it this way, but a few do.

And example of this would be LJ Kennedy. They pay 25 dollars per night perdium, unless you are stuck out for a weekend, then it is 50 or something. Also layover is paid for this.
The perdiem is seperate from there other pay. They still start at 40 cpm. Which is not that bad a rate these days, I have seen worse. And the driver can still claim the remaining perdiem at the end of the year on there taxes filing a 1040A. So the driver looses nothing.

 

We have actually had drivers approach us on offering per diem - it is something they are looking for.

As for offering per diem on top of wage - forgive my accounting mind - but isn't that a pay increase? Per diem is an offset for expenses incurred on the road - expenses that are the employees responsibility by IRS standards. If the company pays those through per diem, but doesn't offset wages, doesn't that mean an increase in pay - in essence a raise? As I said, I have an accounting mind... I usually can follow the numbers.

The drivers who have approached us mentioned offsetting their wages - what am I missing?