"Fake" per diem to lower taxes

Per diem has been pretty common in trucking since the 90s. Never really heard of it being used on someone who's home every night but stranger things have happened? Basically, it is the company taking over the road expense the driver could claim on his taxes and,in return, gives him a portion of his gross income that he doesnt pay taxes on.

He can still claim a portion of his road expense but he has to deduct the per diem portion from the amount he could claim. There again, you usually cant claim road expense unless you are away from home an extended amount of time. It is figured by each quarter of a day. Its very complicated and like one poster said, best to get with a Tax Pro who deals with per diem to see if it will hurt or help you?

Basically, it just limits the driver on how much road expense he can claim on his taxes, while at the same time giving him a break on tax he pays on his gross. For instance, if his actual gross is 45,000 and they show 6,000 of it as per diem, he will pay taxes on 39,000 (which will be shown as his gross instead of the 45,000 he actually made). The company then gets to claim the 6,000 as their expense. As another poster stated, it also helps them on other taxes. Just another Tax Loophole.

 

If they're paying him per diem, then the amount that they pay per diem is non taxable. This is standard practice for companies that have employees that are 100% travel. I experienced this when I worked for GE on wind turbine construction projects. As I understand it, trucking is a bit of a different animal, however.

You should consult with an accountant to ensure that the way they are paying the per diem would survive an IRS audit.

 

A met a dude working for an OTR fleet, makes 65k a year or so. He says they give him W-2 showing they paid him 53K. 12 K is his per diem that they pay him. To me it feels like a sham, but reading other posts it seems legit. He does not care as his tax bracket is lowered and his employers benefit for not contributing as much to his SS and workers comp. He likes his refund more then their contributions to his SS. To me it is still a sham! They should pay him 65k as work income, and he gets to write off his per diem. Seems like a common practice: they substitute their pay with per diem.

 

As I understand it, as a driver you can deduct $53/day from your income as per diem (if you itemize) for each night you spend away from your home, provided it is more than 50 miles away from your domicile.

For those that don't know, 'per diem' is the amount that you can deduct from your taxable income WITHOUT HAVING TO PROVIDE RECEIPTS AS PROOF, per day, for each night that you spend more than 50 miles away from your domicile address. Per diem includes lodging, meals and incidentals. Since most drivers have a sleeper, the lodging portion is not applicable. Per diem is also variable, depending on WHERE you overnight. For example, Washington, DC is going to have a higher allowance than say, Danville, VA. And it's also seasonal - Miami, FL rates are going to be higher during the summer months than the winter months.

So, the IRS has created a special category for truck drivers to be able to deduct per diem expenses as an average across all locations and seasons. It just makes it easier to do, instead of having to go back and calculate the amount for each day you overnighted away from home.

I'm not a tax professional, so some of this information may not be valid.

For reference: http://www.gsa.gov/portal/category/100120

 

The truck driver earning $65,000, showing only $53,000, due to his $12,000 of per diem, is losing out on 1) social security, 2) Medicare, 3) workman's compensation, and 4) unemployment compensation.

The company is saving hundreds, if not thousands, of dollars in taxes at the expense of this truck driver. Now, multiply this by however many truck drivers that the company has on it's payroll. Their tax savings are phenomenal, all at the expense of the truck drivers on the payroll.

HOPEFULLY, the truck driver is taking this "extra" $12,000 and putting it away into a retirement account, such as a Roth IRA, along with some other savings plan for future emergencies.

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

 

If they did, he (the driver) would also get taxed on SS & medicare (7% of $12,000 = $840 in additional taxes for him). Additionally, as a company driver he would have to itemize to claim that $12,000 per diem, which means he will no longer be able to claim the $6300 standard deduction.

Everyone's situation is different, but company per diem can be beneficial for lots of folks.


That said OP is not away from home and does not qualify...

 

The driver also does not have to pay federal income tax on that $12k. And for someone like me (I'm 36), there's a good chance that social security isn't gonna be around in 30 years when I'm eligible to draw it anyway. I've already come to terms with the reality that I'll have to continue working until the day I drop dead so I might as well save that few bucks a week in ss withholdings.

 

Be careful with the Per Diem. I along with a lot of other truckers now owe Uncle Sam because we weren't paying enough Federal taxes. (I know at least 5 guys who like myself are being garnished). It is great for the young trucker but hurts those seasoned. My company takes some of the Per Diem back on your last paycheck unless you run low miles. I'll never do it again.

 

Nope. See:

 

Theres a good possibility that you could also retire at age 59 1/2 if you take that money you save on the per diem taxes and put it into a tax sheltered retirement account, where you dont pay taxes on it until you start drawing it. By then youd be in a smaller tax bracket. If you were paying taxes on the 12,000, youd pay about .2365% in taxes. Just put that amount in the retirement account instead. Over a 33 year period that would be about $100,000 plus all the interest it drew over that 33 years. You probably wouldnt even need Social Security though if it were still around, that would be great as well.