Interesting per diem question

I am in orientation right now an they said we have to know by in the morning what to do. They will do the per diem thing at 11 cents a mile. But they will give you 2 cents less per mile for doing this. I have kids and I am expecting to be about 40,000 for the year do I take it or leave it? Pleae let me know you thoughts ASAP since I must tell them in the morning. I didn't know that they lowered your mile rate if they did this.

 

Per diem that the company is offering you is only good for them.

Reason 1.
You are getting paid a taxable ss wage less than what is earned. Therefore your ss earnings are reduced. Not a major problem at your age. However, your taxable earnings are less if you are trying to buy a house or get a loan. It is good for the employer though. Less to pay their share on. Lower amount for workmen's compensation calculations.

Reason 2.
Roadkill stated and is correct. If you are injured and have to take workmen's compensation, it is calculated off the reduced per diem amount.

Therefore, in my opinion, it is not a good idea. Not even if they try to say it helps you tax wise.

As a professional tax preparer, that comment does not float well without doing a very good analysis on each person.

 

Let me ask you a question please. Lets say I make 40,000 and my wife makes 10,000 and i claim 5 on my w4 and she claims 0 on hers. What will happen at the end of the year? Would I still get a refund or would I owe money? The taxes would be done in South Carolina. Insurance is taken out before tax and it is 90 a week. What do you think.

 

There are too many things to wonder about.

Please don't answer, just think for yourself.

Do you own or rent?
How high is the mortgage interest and real estate taxes.


What was the income in previous year and how did you claim exemptions?

Personally, I would think having all of the exemptions on your income would limit the amount withheld for taxes and could lead to owing income tax.

You can go to IRS.gov and look for the circular E and then calculate the amount of money to be withheld from a pay check.


In 2006
Standard Deduction was 10,300
Personal Exemptions 3300 each per person. The tax rate federal is around 15% at that level.

 

I claimed four on my w4 (based on $47,500 excluding another $10000 in 403b contributions) last year with no kids and received $250 back from the IRS. I did pay about $9000 in mortgage interest. To keep your two cents, I would claim at least 4 on my w4.

 

my money last year was a lot lower. I claimed all 5 all year and I just qualified for the earned income credit. So I got a lot back of coarse. Tell me this if I take the per diem choice then does that mean that the IRS will look at my taxable total a lot less at the end of the year? So off of what I know of the poor tax (earned income credit) I would still qualify for that? I rent right now so you know. Because lets say that I drive 2400 miles a week and am at .27 a mile that is $648 a week (5 days). So You would take out $52 a day x 5 days = 260 Then you would minus out my insurance which is not taxed. So I would add 260 plus 90 for the insurance. So I would add those two together and would get $350. I would then subtract 648 - 350 = 298. That would be my income for a week. So if that held true every week then I would times that by 52 for how many weeks in a year 52x298= $15,496. If this has made any since I would show a taxable income of only $15,496. So looking at that I would still be qualifing for the earned income credit. Is this right?

 

The 52.00 per day per diem is used as an itemized deduction. The .11 per mile based on your projection is 264.00 per week. I would suggest you talk to a tax preparer. I still do not like the per diem by a company.

 

Per diem is a shell game at the least. If you get too much during the year then you owe the IRS on the overage. receive too little and you can claim the difference on your taxes as an itemized deduction. So ultimately you will still have to make the calculations to find out what you should have claimed as a deduction.

My question is why would you want to forfeit your right to claim the full amount when you file? As a trucker you want as many itemized deductions as possible to help lower your overall tax burden. There are many great lists on this forum for what is deductible.

Know that the companies that offer this make out on not paying ss taxes on that amount and as has been stated before your workers comp could go down in the event of an injury as well as your gross earnings in the event you are trying to qualify for a loan.

Keep track of your expenses and you should still get a decent return.

I vote no on the per diem option. Its your choice though.

 

taking the per diem from the company, is willingly bending over.

at the very very best you will possibly break even.

everything else... you lose... and maybe big time.

 

Ok this may be working the system but try to follow my logic here. every year after deductions I stay under the earned income level which gets me about a $5,000 return between state and federal. If I am on the rd this year and making ok money and my wife is working then we would be over the $39,000 limit to get the EIC. If I take the per diem it would lower my tax liablity a lot and that would alow me to drive even more miles and still not hit that $39,00 as long as my wife is still part time. If this is the case then it would beniffit me to take the per diem. I don't see how my cheap self will ever rack up $52 a day in real expenses. Ok Your turn were am I wrong.