Tax question from new driver

If the company pays a per diem, and requires the ee to "account" to them for his actual expenses incurred in and related to his job duties, AND has a settlement for the difference-----whichever way that might be.....they owe ee or ee pays them...............then there are NO compensation actitities involved. EE does not have to report anything on his personal tax return, and nothing appears in his W-2.

If the company provides a per diem, and does NOT require the ee to "account" to them----- ie a "nonaccountable" plan.........then the company MUST put the per diem amounts in the ee's compensation, and withhold income taxes and FICA/Medicare.......plus they must pay their share of FICA/Medicare........and the W-2 reflects this.

If the ee then wants a deduction (against that amount included in his W-2), the the ee MUST provide ACTUAL deductions OR use the per diem allowances to estimate the deductions, and include in his itemized deductions the results of the method which produces the greater amount of deductions.

The kicker is that the deductions must filter thru the "2% of gross income" computation first, before it gets mixed in with other itemized deductions.

In order to use the allowed expense per diems for food and lodging, truckers are allowed to use their logbooks to prove that they were "out of town overnight".......which is when the per diems are allowed. (Partials are allowed when the ee must halt for rests during the day, and are not out over night.)

Owner operators are allowed to use log books to prove out of town overnight for the meals per diems, but not the lodging per diems.

(reference Code Section 274, and especially 274(d))

 

Look around at truck stops. Some of them have a Trucker Tax Services brochure that lists a lot of deductions for us.

 

This is not how they work in the trucking industry.

The per diem plans that we talk about are far different from the plans you discussed. The per diem plans here are where the drivers reduces his income by say .10 per mile. This is then limited to 35.00 per day. He pays no fica, fed tax or state tax on the amount.

 

Acountants are pretty ruthless vampires as well, always good to find an acountant who specializes in 'Trucking' otherwise you might as well stay at home in bed; and sleep.

 

The Tax Code does not differentiate......274(d) applies....period.
Either your terminology is incorrect, or your assumptions are incorrect. Any per diem is taxable........the issue is the method of presenting the deductions to offset it. If the offset is made at the employer level, then reporting requirements are finished......if offset is made at the taxpayer level, then FICA etc is due.
Read the Code, and then report the Code section that allows your position. This is not a matter of opinions-------it either is allowed, or not.

 

If you are replying to me, I think we may be in agreement, but different ways.

I am an enrolled agent to practice before the IRS. I have been and still professionally prepare returns and business consultations since 1982.

The per diem that is discussed here is like I stated. It is what the companies elect to do under their payroll plans. It is tied to the deductions that are allowed for tranportation workers to take on their tax returns. See publication 463.



Special rate for transportation workers. You can use a special standard meal allowance if you work in the transportation industry. You are in the transportation industry if your work:

• Directly involves moving people or goods by airplane, barge, bus, ship, train, or truck, and
• Regularly requires you to travel away from home and, during any single trip, usually involves travel to areas eligible for different standard meal allowance rates.

If this applies to you, you can claim a standard meal allowance of $52 a day ($58 for travel outside the continental United States) from January 1, 2007, through December 31, 2007.
Using the special rate for transportation workers eliminates the need for you to determine the standard meal allowance for every area where you stop for sleep or rest. If you choose to use the special rate for any trip, you must use the special rate (and not use the regular standard meal allowance rates) for all trips you take that year.


Travel for days you depart and return. For both the day you depart for and the day you return from a business trip, you must prorate the standard meal allowance (figure a reduced amount for each day). You can do so by one of two methods.

• Method 1: You can claim ¾ of the standard meal allowance.
• Method 2: You can prorate using any method that you consistently apply and that is in accordance with reasonable business practice.

The companies can put in place plans that allow them to do this, reducing the income. I have not worked for a company to find the actual code. I can look it up.



A review of the rules indicates that they could be taking the per diems under a pretax plan. It could be considered an accountable plan, but there would be something the driver would have to provide to the employer. However, it is possible, the employer is just automatically recording days on the road.

 

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That pub relates PRIMARILY to the reporting requirements by the taxpayer (trucker). Note that it refers to the different areas of the US, the different allowable per diems therein, vs using one standard, continent-wide rate.

The issue is the point at which the payment to the driver is taxed...........if the company computes the "per diem" on the mileage traveled, but the driver REPORTS his days out (ie logbook) TO THE COMPANY, then only any excess of mileage-based reimbursement over per-day-based reimbursement goes into his W-2. Reason------regardless of the way the amount was calculated, the excludable amount is the amount "accounted for", and the allowed accounting is the actual days out over night, as evidenced by an acceptable document----the logbook.

If the company merely cuts a check, and does NOT receive anything from the driver to show that the reimbursement is based on the days out overnight........ (regardless of the miles traveled--------could be 100 miles with a breakdown, or 1300 miles which would be likely in excess of DOT hours rules......as long as the log book shows "out of town overnight").........then the "per diem" received must be included in the W-2 as ordinary compensation, and driver can take the deduction if he itemizes deductions in his personal return.

The company can only be deemed to be under an "accountable" plan if the supporting documentation----in the company's files--------reflects the actual logbook........and that info has to be retained for the period of the tax return, not for the period specified by USDOT, which as I recall is only 6 months.

There has to be a linking between the amount a company excludes from the W-2, and the days out overnight as represented by the logbook------otherwise the company is open for penalties for failure to withhold and pay, and the taxpayer-driver has unreported income to the extent of the per diem he thought was not reportable due to being under an accountable plan.

It is obvious that you have more knowledge than the average person in this area. Please understand that I do also (or at least "should").......since I am a practicing CPA, with a rather large interest in a trucking operation, who has done hardly anything except tax work......returns, exams, etc etc........since the early 80's.

Now.......I'm not going to reply further to this.......not because I think it is a topic which has no relevance or importance, because it certainly does, and given the amount of misinformation out there concerning taxes, and the importance it has on a great number of drivers and companies, it is a topic that should be researched and hashed out in detail................but, I am so far behind now with extended tax returns due Oct 15 that if clients found out I was taking the time to comment here, I would be tarred and feathered.

Please continue your attentiveness.......it is refreshing to observe competency in the tax world, since there is, frankly, just tons of incompetents running around doing tax work----------and that includes many, many CPAs. It appears that you have the smarts and the enthusiasm to provide your clients with excellent tax work------kudos to you!

 

So if I drive 480 miles and the company is paying me .10 per mile I am eligible to add $4 more at the end of the year?

Also, if I sit I can deduct $52 a day I am not home?

 

If your laptop is used for business use only then yes you can deduct the entire cost of the laptop; however, you might have to depreciate

 

I may end up repeating you but I had trouble following all of the posts.

So, if I am agreeing with you, then great for all of us. I guess I am confirming my understanding of what the company is doing and which method is more advantageous for the driver.

As long as a driver can itemize his/her deductions, then the only downside that I see to a per diem arrangement based on miles is related to the 2% carve-out on miscellaneous itemized deductions (times the marginal rate to really get the real cost). Form 2106 to Schedule A over 2% hurdle to any related benefit. Agreed?

To further explain my point using the 3 driver comparison used earlier...

If the amount of the driver's per diem to which he is entitled, based on the standard rate times the number of days out, is more than the amount paid or "reimbursed" to him, then he has additional Form 2106 expense for that difference (which is then subject to Schedule A hurdles and 2% miscellaneous haircut.)

HOWEVER...
If a driver's actual per diem entitlement, based on the standard rate times the number of days out, is LESS than the amount paid or "reimbursed" to him (meaning the company actually over "reimbursed" him, then the argument is is that he has additional income? Correct?

If that is the point, then on the surface, I would agree.

However, practically speaking...where and how will the driver report the "excess" per diem amount paid to him?

Would you merely add the excess to Line 7? I would say that Line 7 is the proper place...however, I would argue that payroll should include re-class the amount of the difference so that it is shown on his W-2 in the Box 1 amount. But that is not likely going to happen.

Personally, I will take the audit risk of not including the difference into income, at all,...UNLESS the amount is a somehow terribly material number.

I think we have to prudently weigh the risks versus the costs. And at $137.50 per hour...I just spent about $75 just reading and banging out this post.

I would be willing to bet that the tax difference will not be that great (in most cases) in order to recover my cost of the analysis. Compute the proper per diem, compare that with what was reimbursed to him already. If more, and he can itemize, then report it. Otherwise, ignore the difference and press on to the next client.

I understand the point of doing things correctly but I think we get to a point where we aren't stepping over dollars to get to dimes.