Per Diem?

Regardless, reducing your taxable wages $50 some-odd dollars each day out is not something to "overlook" doing at tax time if your not paid with per-diem.

I personally won't work for anyone who has forced per-diem ... and BTW, that should tell you all you need to know when you're trying to figure out just who it's good for. There are very few "win-win" situations in the real world ... somebody always get's more then the other in any "deal".

 

If you get "charged for the privilege" of receiving per diem payments, it lessens any advantage you might receive from the tax-free income. At 2-cpm, you're probably on the loosing end.

OTOH, if you cannot itemize your deductions, a per diem program does give you the benefit of receiving some of the advantage of the per diem deduction you might not otherwise receive.

Downside... it lowers your reported taxable income, although per diem payments must be listed on your W2. This can have an effect on any benefits that are based on reported gross income, and your ability to secure a loan.

Best advice... talk to a tax professional who understands the transportation industry. A tax person at a general tax outfit like H&R Block for example, may not be the best choice.

 

See, there is the issue. What these trucking companies call "per diem pay" is not what everyone else calls "per diem pay". In any other industry that I'm aware of, per diem pay is extra pay they PAY you to compensate you for being away from home while working for them. In the trucking industry, what these companies call per diem pay, is just them saying "we aren't gonna take out taxes like we should, so you'll get more money in your check per week, but end up with a bigger tax bill in April because we screwed up on purpose". And then they actually charge an administrative fee to the driver for letting them screw up his taxes. And since your social security withholding is based on taxable income, you aren't paying as much into it as you should either. Guess when that'll shafts ya....yep, age 65+ when you should be golfing. I did that per diem thing with one company I worked for in 1993. And guess what year is the only year I've owed more taxes in april. Uh huh, 1993. Also, the company saves money from the per diem shell game they play too. I'm not sure how it goes from their side of it, so I won't comment any further on that. Just know, they don't do all this to help the drivers. It's a game to save them money, and to make them money with administration fees, and nothing more.

 

The short answer is "silly govt beaurocracy"!

 

Its not above and beyond what you'd be paid as an employee, but these are IRS-approved plans. The carrier just cannot shield more of your income than what you'd declare as a deduction.

 

This is the way to do it if you are an OTR driver whose company pays less if you have them figure and pay the per diem. Take the full pay and opt out of the 2nd, untaxed check. You aren't really opting out of the per diem rules because at tax time you will take that as a deduction, which lowers your taxable income (just don't forget to claim it when you file).

People often get confused and think the per diem pay is free money or something. It's not. It is just an amount that is not taxed. That will affect people differently depending on their tax situation. You will be in a lower tax bracket because your income for IRS purposes will be around $15k lower than it really is.

The practice of paying drivers less if they choose to receive a separate, untaxed per diem check should be illegal, but who knows if they have some sort of legal justification for doing so. They probably consider it an administrative fee for cutting you another check (which is B.S.).

Just remember: you need to keep your logbooks as a legal record of your eligibility to take per diem pay. Some local drivers have gotten into trouble with the IRS for claiming the per diem deduction when they are actually home everyday. You need to be able to prove that you were away from your domicile for every day you claim that deduction.

 

I have a feeling that taking it from the carrier will also affect what you will eventually collect from Social Security. You don't want them thinking you made a lot less than you really did all those years.

 

Thats why it confused me greatly. At that company Per diem was "bonus" money for being out of state. I guess ill just opt out of per diem in the trucking world if its not actually bonus pay and just a bunch of bs with taxes.

The entire reason for per diem was to pay for meals while out of town. Some guys ate steak everynight and every morning. I was more frugal myself only eating out at night to save $30 a day extra.

 

Yep, it is definitely not a bonus. But if you are an over the road driver, there is no reason not to take the deduction at tax time. Some people just prefer to have it up front.

 

Using your example the company does not pay social security on the 12,000. At 7.5% that is 900 that they save and if they have a hundred drivers it is 90,000 and a thousand 900,000.... It adds up for the megas.