Per Diem Scam? Please explain the payroll calculations to me.

Discussion in 'Questions From New Drivers' started by Fly'nCJRanch, Sep 30, 2013.

  1. RogerThat72

    RogerThat72 Road Train Member

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    I'm away from the house for 3-4 weeks at a time the half days would be the ones of me arriving and leaving back out. The rest are full days 10 hour resets as I run recap.

    for the second answer you have me are you saying I would need receipts?
     
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  3. double yellow

    double yellow Road Train Member

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    Here's how to enter your DOT per diem in TurboTax:

    1. In TurboTax, search for this exact phrase: job expenses, employee (you can copy/paste it from here).
    2. Then, if using TurboTax Online, click the Jump to job expenses, employee link in the search results.
    3. On the Tell Us About the Occupation You Have Expenses For screen, enter your occupation (Truck Driver, Airline Pilot, etc.) and click Continue.
      • If you land on the Job-Related Expenses Summary screen instead, click Edit and then click Continue.
    4. On the next screen, select the checkbox You are in the transportation industry and click Continue.
    5. On the next few screens, you'll be asked about home office expenses, mileage, and other topics. Answer those questions as appropriate.
    6. Eventually you'll come to the Any Other Expenses? screen. On this screen, enter your unreimbursed DOT per diem in the field Meal expenses covered by Department of Transportation rules.
    Note: do not multiple your per diem by 80% -- turbo tax does that for you. Just count the days you were away, multiply by $59 ($44.25 for each day you were home for part of the day), and enter that number in the field mentioned point #6

    You're right, but since you're using turbo tax, don't do the 80% calculation because turbo tax does that for you.




    If you are ever audited, you may need to prove what days you were away from home. I just keep my log books...

    That isn't what
    brian991219 was getting at though -- to claim per diem on your taxes you'll need to itemize which means losing the ability to take the $6,200-$12,400 standard deduction. So yes, you will want to keep every expense receipt so you can claim those expenses on top of per diem. In some cases, you may be better off not claiming per diem and using the standard deduction instead. Turbo tax will figure that part out for you though...

    One of the main advantages of company perdiem is the ability to claim perdiem and keep your standard deduction.
     
    Last edited: Dec 27, 2014
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  4. RogerThat72

    RogerThat72 Road Train Member

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  5. shredfit1

    shredfit1 Road Train Member

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    What Snowy said, and this:

    It seems some people don't understand that per diem actually hurts the individual getting it over time. For example, an employer has to shell out a greater $ amount on an employee's social security and medicare taxes(calculated from gross pay)... than actually comes out of an employee's check. Thus, the employer can significantly reduce this tax burden to themselves by offering per diem. The catch? After years of this, it will reduce your bottom line in receiving these benefits(you are paying for them as is your employer).
     
  6. brian991219

    brian991219 Road Train Member

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    Yes and no, forced per diem deducted directly from your check is ALWAYS a bad idea for the reason you state above, mostly the reduced lifetime earnings when it comes time to retire or file for disability, buy a car, house or anything else that is dependent on your gross income. It allows you to have more immediate take home pay, but that is a very short sighted goal. If you use per diem as described above, after you have been paid your full rate, taking it as your tax deduction when you file and itemize your taxes then it can be benificial to the driver, but never take it up front as a payroll service, you are always going to be the loser in that case.
     
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  7. double yellow

    double yellow Road Train Member

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    Not always. Remember that not only does the company eliminate that 7.65% payroll tax on payrolled per diem money, but so do you. That's $1071/year in payroll taxes that you do not pay (assuming $14,000 in company per diem). And as long as the company pays close to ~$45/day in per diem, you also get the benefit of being able to take the standard deduction ($6,200-$12,400). At a 20% income tax rate, that's another $1,240-$2,480 in income tax savings for YOU.

    Yes, the trade-off is that your Social Security and/or disability payments will be reduced when you're no longer working: A 30 year-old driver earning $52,000/year and not taking company per diem will be able to draw $1,208/month from Social Security at age 65 (assuming SS is still around and they don't change the rules -- again). A driver earning $52,000 year, but having $14,000 of that as company per diem, can retire at 65 and draw $992/month. Sounds like company per diem is short sighted, right?

    The thing is, the US Government is a very poor allocator of resources; it tends to borrow from its investments rather than, well, invest them. In fact, the current Social Security system is essentially a ponzi scheme, the only real differences being that a) contribution into the ponzi scheme is mandatory and b) the social security administration is kind enough to project when its ponzi scheme will fail (currently estimated to happen in 2030).

    A conscientious investor can take that extra few thousand dollars and compound them at a higher rate to wind up with a better retirement. If that same 30-year old driver taking company per diem invests just $1,000 of their $2,000+ tax savings into an IRA or 401k at 8%, they'll have $191,555 in their account when they're 65. They can then draw $1,250 per month indefinitely (the account will actually still grow slightly).

    So the company per diem driver utilizing only 1/2 of his tax savings towards private retirement will retire at 65 drawing $2,242/month instead of $1,208/month. Now who's being short-sighted?


    But wait, there's more!
    [​IMG]

    The 30 year old driver is utilizing private retirement in addition to the government so he's spreading his risk. Americans seem to take for granted the United States' continued existence; they should not -- great civilizations last, on average, 200 years. So what are the odds that the United States of America will have fallen by the time that 30-year old driver dies at age 90?


    Probability of great civilization falling = 1 - (199/200)^60
    = 26%

    There is a 26% chance of a great civilization falling in 60 years! Is that a risk you're willing to take? And that is on top of the risk that Social Security won't still around assuming the USA does survive.
     
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  8. shredfit1

    shredfit1 Road Train Member

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    I agree 100%. One can use per diem on your own taxes while filing and it can/could help lower you bracket rate... Real helpful if you have a wife that make pretty good coin as well.... However, as stated... If the company is forcing you to do it(deducting it from your gross pay)... it's bad bad bad.
     
  9. shredfit1

    shredfit1 Road Train Member

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    You have and IRA or 401K paying 8%.
     
  10. double yellow

    double yellow Road Train Member

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    The S&P 500 with reinvested dividends has averaged over 9% since 1871.
     
  11. shredfit1

    shredfit1 Road Train Member

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    Current real return rates for S & P are averaging 0.77% Without dividends. Mind you this is a true monthly breakdown, a real world breakdown.

    Heck, I'm doing better in the money markets. But nowhere near 8%. http://ycharts.com/indicators/sp_500_monthly_return
     
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