Per Diem Question

Usually... and I stress Usually..
Company per diem simply treats $59 of your gross income as non taxable. So the company does not have to figure this into your gross income for your FICA and FUDA costs.
Employers pay matching amounts to your Social Security deductions. I don't remember the exact amount, but about 7%. So you pay 7% of your SS eligible income and the employer pays a matching7%.
Now if you claim per diem, $59 per day (that you are away from home) is deducted before calculating your income taxes and FICA. The same will go for the employer portion of the FICA.
This saves you taxes up front, being deducted from your income and some FICA.
Here is an example.
Two drivers, both gone identical days, earn identical gross amounts.
Driver One does not choose per diem in calculating his taxable income from the employer.
Driver Two does choose per diem.
Driver One Driver Two
Gross Income $1,000 $1,000
Per Diem Allowance 00 7 days@59 ea -413
Gross Taxable inc 1,000 587
FICA deducted -70 -41
Fed Inc Tx (12%) -120 (10%) -59
Net Paycheck $810 $900

This is assuming 52 identical week's income totaling $52,000. Driver one is in a nominally higher tax bracket, so his rate is a bit higher.
Now keep in mind, driver one can now deduct that same perdiem rate from his income taxes, when filed, equalizing the taxable income rate and taxes paid.
The difference is driver two has $90 more per week to use each week. Driver one will get that money back after filing his tax return.
The net pay for both is identical when all is figured.
The difference will be that Social Security looks at driver two as having earned less income for the purpose of figuring benefits.
You may choose not to take the per diem deduction from your taxes and instead use actual costs incurred. For most of us, the actual cost incurred is less than what the govt allows under per diem. Acutal costs work out better for persons, such as sales reps, that use a hotel each night.
Companies like to guide you towards per diem since they will not be required to pay the matching FICA costs on that portion of your income.
Hope this helps.

 

In the long run though, the only one that truly benefits is the company.


There is not a great deal of difference in tax rates below 100,000 dollars anymore to cause a great concern on the tax savings from this.

However, the loss of potential workmens comp revenue, unemployment dollars and social security income when retired by reducing the gross income hardly justifies the risk involved.

It really comes down to each individual situation to determine if it is better or not.

I have seen a few where it really makes no difference.

 

My mother in law for one. She's retired and I won't give her name of course. However she's been doing my father in law truckers taxes for 33 years.

The other is Jerry Dunn CPA of Cochran Head Vick & Co. Here is their web site. http://chvcpa.com/index.htm 1251 NW Briarcliff Parkway, Suite 125
Kansas City, MO 64116 816-453-7014

Since my mother in law is retired I double checked everything she told me with Jerry Dunn. If you are not a customer of his he probably won't help you. The guy does my taxes.

 

is Pre diem a goo or bad idea

 

Read Roadmedic's post above...

I'm paid percentage of what the truck's paid. Then they will deduct the per diem. Now with this new number, they will deduct the SS, Fed, State taxes, ect.. Once they have that done, they will add the per diem back in, giving me my net pay. I'm paying less in taxes, however the company is also paying in less to their share, worker's comp, ect. It really benefits them more than me, because IF I need to use worker's comp, or Medicare/Medicaid, it shows that I have very little paid into it.

 

A VERY BAD IDEA if its the company paying it. Its better if you take the $59 the Feds are offering as a deduction since most things you use for trucking,like a cell phone bill,are tax deductable to some extent.

 

100% correct. This came about in the last year or two.

 

You get 80% of $59 or $47.20 a day. Then you subtract 2% of you AGI from that which is roughly $1000.

Last year the standard deduction was $5800 for a single person which equals about 120 days on the road to break even.

The $11,600 for a married couple breaks down to about 240 days on the road to break even.

Given you also can deduct job related expenses it is beneficial to itemize if you are an OTR driver.

That's even before you throw in medical, mortgage, etc if you have that stuff.

Always opt out if you have a choice. Live for the long term instead of what you can save on next weeks paycheck.

 

My best advise is get of the company sponsored per diem ASAP. Reason being that it takes away your SS eligibity. Your per diem will be given to you as a reduction in your overall pay. They doc your base pay and then give you back a per diem. Per diem does not get counted as income on your W-2 and therefore is not taxable. Meaning if you made if you made 40000 but 10000 was paid in perdiem then as far as SSA is concerned you only made 30000. On the flip side if you just wait till tax time to claim your perdiem then you get to be on the tax rolls as making 40000 and still get to claim the per diem on your taxes. A company sponsored per diem is never tailored for your favor. The company saves money for you to be on that program and some companies even require it. If your company doesn't require it de enroll ASAP.

 

I have a question about per diem also. im a company driver and im married. i dont usually do long hauls but im out about 125 or so nights a year. my company doesnt offer per diem pay. so im wondering if im gone enough to be able to claim the perdiem or is there a set rate that i need? thanks