Per Diem is Great...

Could somebody please explain what is Per Diem and how does it work? My budy said to never do this, but he has only worked a short time. Hes a good guy, just need someone with expereince to answer. Please

 

Go up to search and type per diem. You will find lots of info there.

 

Thank you RM


I did merge your question into another thread that answers what your looking for
Read back from the beginning
Our search feature is located on the site tool bar third from the right
Good luck

 

I think you would have to do the math on this one. By that I mean run two tax scenarios for the year. One with and one without. There is more to consider than just the per diem. Other write-offs like your mortgage interest, taxes and insurance could impact it as well. Compare your tax situation as well as your net income and see which scenario provides the best outcome.

If you have a copy of tax software from last year you could analyze this pretty easy. Just create a new file and fill in some assumed income numbers for both situations. Compare the outcome.

 

Not entirely true. The income amount can affect your index but they do not base it on the last 5 years of income.:

"Many people wonder how their benefit is figured. Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or "indexed" to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most. We apply a formula to these earnings and arrive at your basic benefit, or "primary insurance amount" (PIA). This is how much you would receive at your full retirement age—65 or older, depending on your date of birth."

Source: SS website
http://www.ssa.gov/pubs/10070.html

 

If you are getting $.09 a mile and average over 500 miles a day they are paying to much per diem . IRS allows 80% of $52 .That's $41.60 a day and you're getting $45 , more if you get more than 500 miles . Your carrier could be fined and forced to stop per diem payments . Carriers paying per diem using mileage are more likely to be audited . The excess payments would be put on your W-2 as income .

 

We used to calculate these things for our clients we did accounting for. We would plan to keep the earnings at a medium or lower level to keep the self employment taxes down. In the last 7 years of working we would change the methods of keeping the self employment down and increase the wages or earnings to higher levels.

This results in a distortion of the index and with a variance in the last 7 years it would create a larger return on the social security available.

 

As I was posting this I thought that might be what you were doing. That makes perfect sense.

 

Finally got our taxes done last week, (had to file an extension). So I asked my accountant about per diem and told her I was looking into trucking. She said it depends on where you spend the night as the rates are different in different locations. She showed me a table with all the rates and said they do this for a lot of owner operators. Is it different if you're a company driver? Does anyone's tax preparer/accountant use this table against your log?

 

Tell her to go to the IRS Pub 463 and read page 6.