Per Diem Screwup

First off,,, this is where the "thought process" is wrong.

You can claim $63(x80) for full days out, (75%($63(x80))) for partial days out.

$68 for those days in Canada.

this is based upon the whole year.

The company will take x amount out, you need to keep track of this.
You need to figure what you would earn if the company did not take it out.

What you would earn - what the company took out = what you still can claim

Pg 6/12.

 

Use an accountant... it's worth it.

Payroll can fix your check.. show them and they will fix.

 

You'll get it back, regardless. This should not affect how you do your taxes.

Just make sure you itemize and take your standard daily meal allowance deduction, especially if you run OTR

 

Just because the company pays per diem doesn't mean you don't have to figure it and itemize. All they are doing is giving you the deductions throughout the year. If they pay more in per diem than you'd otherwise be entitled to deduct, YOU OWE TAXES ON THE DIFFERENCE! Likewise, if they payed less in per diem, you'd get to deduct the difference. Either way, you must figure out how much you were entitled to deduct and compare that to what they paid for per diem.

Personally, I don't care for per diem pay. That money is not figured as "income", which means if you're applying for a mortgage, you don't get to claim as much income as you otherwise would if you were just paid without the company playing those silly games. Not only that, but if your vacation pay is an average of your weekly earnings over the past year, guess what! You got screwed again, because they're only basing that off your pay WITHOUT the per diem tacked on. If you're injured on the job, your disability is also going to be based off that lower amount. Then, when you're set to retire, again, your earnings (and therefore your benefits) are once again based off the lower amount paid to you as "wages"....not including the per diem. It's just another way company's have to save money at the driver's expense.

 

Perfect example here or the kind of person who needs a professional to do the taxes.

 

Especially since he just got the typical TTR per diem/tax advice with it's usual spectrum of lesser and greater degrees of misinformation.

 

The first paragraph of "Bulldog's" reply is the correct answer. Those that are on the company per diem programs should still keep track of their days out in order to take advantage of the M&EI deduction on their taxes. The difference in per diem paid vs M&EI deduction will in most cases allow the overpayment of taxes to be recovered.

 

Better to not be paid on per diem.
Take whatever pay you have coming as PAY. Then itemize your tax return, and seriously folks, while this isn't that complicated to do, you are quite likely better off to pay a tax person, I mean a CPA owned accounting outfit, not H & R or Liberty or any of the other big franchise outfits. If you are an O/O you undoubtedly use one anyway.
But even if you are a company driver, find an accountant who knows what accounting is actually all about. These "experts" at the big tax places, are usually people off the street who have been given a very short period of instruction for doing income tax. They likely neither know, nor care, how to give you the maximum deductions, while still keeping legal.

 

"Per Diem" is essentially considered a "reimbursed expense". The company is paying you as though you had to pay that amount, knowing that you'd get to claim it as a deduction at the end of the year if it wasn't paid in that manner. If they over-reimburse you (pay you more "per diem" than you'd otherwise be entitled to deduct), you owe taxes on the overage. If they under-reimburse you (pay you less "per diem" than you'd otherwise be entitled to deduct, then you deduct the difference.

The effect is two-fold: 1) It lowers your reported wages, thereby reducing the employment taxes (social security & medicare) your employer needs to pay. 2) It lowers your reported wages, which reduces what it looks like you earn...affecting vacation pay, your ability to get a loan, social security benefits, disability insurance benefits...basically an adverse affect on everything that is based off your wages that would be payable to you.

The ONLY "good" thing for a driver taking per diem is if you're divorced and your alimony or child support payments are based on your wages...in which case per diem helps keep a little more in your pocket by keeping your wages down.

Perhaps that's a better explanation than earlier...