Per Diem question.

I can only comment on my situation. If I do my daily call-in on the QC every day, that means I am asking for per-diem for that day. I think it works out to something like 300 dollars a week that isn't reported on taxes, and it doesn't show as income either. Of course that number depends on what I earned for that week. That's my assumption of how that works. So I pay less taxes but it also makes me look more poor on paper, even though I am not. So if I were looking to mortgage a house, it might not be a good idea. Otherwise, it's probably better if I do those call-ins so I can keep more of what I earn and earn interest off it... which could, in turn, lead to higher down payment on property in the future. So if I earned 1800 1 week, it would only show income of 1500 which is what I get taxed on. If I wanted, I could only do the call-in a few days a week to narrow that number and on my pay stubs, it appears like it claims a smaller amount than 300, maybe 150 or around that.

As far as your situation, I don't know man. It might be worth paying a professional to look at it and have them give you their opinion. The money you pay to get some consultation might save you a lot more later. Taxes are unfortunately complicated, and always changing. It shouldn't be, but it is. I wouldn't just blame the company outright for trying to confuse you, because the feds are always confusing, and they are always slow. So I would start there.

 

My per diem is based on mileage. I think it's something like 12 cpm. Some of the loads I run are paid by percentage and there is no per diem paid on those. It makes a huge difference. One week I ran all percentage loads and my take home was noticeably less than a week paid by mileage/per diem.

We don't have do any kind of call in to get per diem. I think maybe your company is using the per diem as an incentive to get drivers to call in.

I had no issues getting a mortgage (and two separate car loans) while on per diem. Lenders look at what you actually bring home/deposit in your bank and both those would show per diem pay.

 

You are probably correct. We run reefers so they are probably using it as a way to incentivize the drivers to check their temps more regularly. Of course I check my temp every time I stop, but you know how some folks are. Our call-ins require us to send a reefer temp.

 

Per diem is a pitfall. There are IRS rules about per diem. Your per diem does not count as income. Not for unemployment, social security, and many mortgage companies. Research to find out if it is right for you, before you accept per diem please.

 

No, they use per diem to save the company money, period.

 

Yes, there are downsides, but it saved me significantly on my taxes, and paid me around $5,000 more on my paycheck than if I didn’t claim it as per diem.

 

The more per diem you receive the less gets paid into your social security , which means you will draw less when you retire , i will not work for anyone that pays per diem.
Real per diem is you are issued a company credit card to cover hotels , food and incidentals.

 

The first part is right, the second part is not.

Let’s start with the second part. Getting a credit card for expenses is not per diem. Per diem is a flat rate reimbursement for meals and lodging. No credit card involved. Here comes the unimportant part: there is, technically, no per diem in trucking. The IRS term is “meals and incidental expenses”. Nevertheless, the industry calls meals and incidental expenses per diem, but the IRS ALLOWABLE RATES for MIE are HIGHER and simpler than Per Diem.

Now, as to the first part. You are absolutely correct to state that by accepting part of your pay as per diem, YOUR contribution to SSI (through FICA) is reduced. Moreover, the COMPANY contributes the same amount less. So you get to keep your money, on your check, but that company contribution? Poof! Gone! (And the company thanks you).

So, why would ANYONE take per diem? Well, for one, the combined FICA contribution is 15% (round numbers). You get to keep your 7.5%, you lose the company’s 7.5% contribution.

But, what happens with that 15% of your check you have so benevolently given to the government? Well, some goes to disability (government disability insurance). Some goes to survivors benefits (government life insurance) and some of it goes to your old age social security (government retirement plan). In a perfect world, the government would handle your money prudently and carefully invest your money, and return the money with handsome investment returns when you reach your golden age and draw your government pension. Unfortunately, it’s the government, and they don’t even know how to spell prudent. Your money gets put in US treasury bonds, which do not even keep up with inflation. So at retirement, you don’t even get back what you put in.

Now, let’s compare that to the rapscallion that takes his measly 7.5% PLUS the 20% income tax saving (combined federal and state), buys himself some life insurance and disability insurance, and invests the rest in some nice, boring mutual funds? Let’s say that the 7.5% gets used up by the two insurance products (it won’t), and half of the 20% savings gets invested, returning 10% per year. The other half is earmarked for increasing lifestyle. And the final assumptions: there is $12,000 per year in per diem, your age is 40, and you plan to retire at 67.

Put those numbers in a retirement calculator, and it spits out $164,000.
Now, we put the 15% in at 0% return in the same calculator: $48,000

So, even though you got to spend more, have more life insurance and better disability insurance, taking the per diem and investing it yourself is, mathematically, the better choice.

Of course, that assumes you are a responsible adult that can execute a plan, other than going to Vegas and putting it all on red.

 

Many large companies seem to put an employee on their per diem automaticity. My last company did it automatically right before I left. My 2nd company tried to do it from the start. I was attentive enough to stop it in orientation. They treated me like I was evil for even trying

 

This is a great post, but we both know that 90% would spend every penny and not invest a dime of it. That’s why I don’t even mention the investing aspect when explaining per diem; waste of breath, or keystrokes in this case.

On a side note, 25 years ago or so there was talk of allowing an opt out option for social security as a way to shore up the forecasted shortfall. I was begging for that to happen. But it never gained any traction.

I was in my early twenty’s and would’ve jumped on the opt out because I knew I could do better investing it. Of course, now I’m in my 50s and would never opt out at this point; already paid too much into it and not enough time to make that up.