Perplexed by forced per diem option?

Lots of herp and derp in this thread, with completely incorrect information being put forth as if it were the gospel truth.

The ONLY downsides of per diem are reduced taxable income, and the impact that has on social security, unemployment, workman's comp., etc., and if your employer takes an administrative fee. That's it. Other than those situations, per diem is absolutely better for the driver.

A quick example:

Driver makes "regular pay" of $35,000 per year and $15,000 of per diem, for total compensation of $50,000. The driver will also be able to itemize if they have enough other itemized deductions, or take the standard deduction if they don't. Let's assume no other itemized deductions, so they take standard deduction of $5,950 for a single individual. They will also have a personal exemption of $3,800. So, 35,000 - 5,950 - 3,800 = 25,250 taxable income. Taxes are $3,356.

Now, with no per diem:

$50,000 of taxable income, and a $15,000 deduction for per diem. Take it as an itemized deduction. But wait! You don't get the whole thing, you only get 80%. So, 15,000 x .80 = 12,000. And it is further reduced by 2% of your AGI. 50,000 x .02 = 1,000. So now, what was originally going to be a $15,000 deduction is reduced to $11,000. Now let's calculate taxable income and the tax. 50,000 - 11,000 - 3,800 = 35,200 in taxable income. Taxes are $4,849.

So, a driver with per diem pays $1,493 LESS in taxes than the "smart" driver that refused per diem.

If a big part of your life's plan is bellying up to the government benefits trough for as much as you can get, per diem may not be for you. However, if you would prefer to have more of your own money available to you to do as you wish, then take the per diem.

There is no situation that changes to result of per diem ALWAYS being better as far as how much of your money you get to keep. Doesn't matter whether one itemizes or takes the standard deduction.

Per diem might not be for you. But make that decision with a correct understanding of how it really works, rather than relying on the misinformation of a bunch of drivers.

 

That's beacause you opted for the 80% choice. Next time use the 50% option which requires no proof (logs). This is my understanding from doing it through TurboTax.
Hope this helps.

 

Take the 80%. There is no reason to leave 30% on the table.

Heads up on this, guys, as it is important. The per diem serves as Deemed Substantiation for the dollar amount of the expense. That means that you don't need a receipt to establish the dollar amount. However, you ALWAYS need some sort of log, whether it is paper or electronic, to establish that you were in fact away from your tax home, in travel status, when that expense was incurred.

 

Wanna bet? Try pulling that off in an audit with no way to show you were away from your tax home.

 

I get 12 cents a mile perdiem and the company takes 3 cents so I still make 38.5 a mile but 12 cents is tax free. I am starting an LLC and want todo this so my income is as small as possible while still being a average per irs and the LLC has higher profit for which after expenses i will pay less taxes.

 

I am not sure I understand your post. Are you looking for advice?

If you set up an LLC, and you get paid on a 1099, there will be no employer paid or administered per diem. Instead, you will deal with the per diem on your own individual return.

 

I have heard that an OTR truck driver can totally for go per diem in order for all of his income to be credited for purposes of social security, medicare, workman's compensation, and showing a truer picture of earning more money on one's W-2 form, depending upon which trucking company the driver works for.

I have also heard that some OTR truck drivers have no say in the matter whatsoever.

I can see how per diem can sometimes work against an individual.

God bless every American and their families! God bless the U.S.A.!

 

You got that right.

False. Your examples, with both drivers starting with a $15,000 deduction, assume that at the end of the year, "Per Diem" (which is not paid 'per day' at all) and Standard Meal Allowance - which is calculated per day - are exactly the same. So-called "Per Diem" is calculated per mile, and there is not one company driver among us who has not sat for 2 days or more waiting for dispatch to get their act together, or waited 2 or 3 days or more to get the truck fixed, or sat on a dock for more than 12 - 24 hours waiting to get unloaded... the point is, you're away from home and not receiveing a single penny toward "Per Diem" because it is paid by the mile. No miles? No "Per Diem" for you!

On the other hand, the driver that chooses to take all his compensation without "Per Diem" earns a $47.20 deduction for every day he is away from home, regardless of whether or not the truck is moving, and also $35.40 for the day of departure from home and the day of return to home.

False. Unless you wrongly assume that a driver on "Per Diem" is earning the same exact amount of deduction as the driver who chooses the Standard Meal Allowance. And where I work, the two are not even close. The Standard Daily Meal Allowance gives a much larger deduction at the end of the year than the mileage percentage "Per Diem" does, and by a large margin, too. The difference depends entirely on how many miles you drive and your examples don't even mention miles.

Correct. And before you assume that both drivers will start with $15,000 to deduct, which is a completely false assumption, better do the mileage calculation for "Per Diem" based on how many miles you will drive versus the "days away from home" calculation to determine the Standard Daily Meal Allowance. Combine that result with the reality of "Administrative Fees" and reduced contributions toward your bought-and-paid-for entitlements and reduced credit toward annual income and therefore lower credit score, and I think you'll find that there are very few drivers who will receive more actual benefit from so-called "Per Diem" than from the Standard Daily Meal Allowance.

 

And with just one post you demonstrate that you have a very limited understanding of what per diem is and how it works.

This is the most telling about your lack of understanding. "Per diem" is by definition, "Per day." For IRS purposes, there is no difference between "Per diem" and "Standard daily meal allowance." They are exactly the same thing, $59 per day (and 75% of that on days that you leave and return to your tax home).

And again, you are wrong. That some companies choose to calculate the amount of per diem to the driver as a per mile amount doesn't change the fact that per diem is $59/day, every that you are away from your tax home, REGARDLESS of any calculation done by the company. If you wait 24 hours to get unloaded, and your company says "no miles, no per diem" it doesn't matter. The driver is STILL allowed to take a full $59 per diem for those days.

The driver that takes per diem earns $59 per day (or 80% of $59, as appropriate) every day he is away from home, except for the days of departure and return. What is important to remember here, is that it doesn't matter how the company calculates it. The driver is ALWAYS entitled to it, and can take it on their return.

And once again, you show your lack of understanding. This is what happens when your perspective is entirely that of a driver, without understanding the underlying tax rules.

Per diem is ALWAYS $59/day (except depart and return days). It doesn't matter how the company calculates it. And my examples don't mention miles, because per diem isn't dependent upon miles. The IRS cares nothing about the number of miles driven, and the number of miles driven doesn't impact per diem.

Not a false assumption at all, as previously explained. Key point to remember, mileage has NOTHING to do with allowable per diem deduction.

Addressed in my initial post on the subject.

Credit score is a function of how you pay and manage your debt, not your income.

Keep believing that they are different, but when you state that publicly, you demonstrate your ignorance.

 

I know what "Per Diem" is and I know what it means. My problem is with the assumption in your 2 examples that a driver that chooses "Per Diem" Mileage Pay will wind up with exactly the same $15,000 Tax Benefit to work with at the end of the year as the driver who chooses Full Mileage Pay and takes the Standard Meal Allowance. Where do you get the idea that "Per Diem" mileage pay will always equal $59 per day for every day you're away from home?