2011 per diem

Excellent! Exactly the clarification I was looking for. Thanks.

 

Let me try to explain this again. Carriers usually pay a driver per diem based on a mileage rate;
Lets say that rate is .10 cpm.
Lets say the driver makes .25 cpm taxed.
Over the course of a year Mr. "Smith" will drive 130,000 miles.
Taxable earnings 130,000 miles x .25 cpm = $32,500.00
Untaxed Per diem 130,000 miles x .10 cpm = $13,000.00

Mr. Smith is a regional driver and gets home every weekend so he only worked 50 weeks out of the year (2 weeks paid vacation). 5 days per week x 50 weeks = 250 days that Mr. Smith was on the road and qualified for the per diem.

250 days x $59.00 per day = $14.750.00 x .80% (the actual amount the IRS allows us to deduct) drops the allowable deduction to $11,800.00.

The Per diem also has a 2% AGI floor so we must further reduce the allowable deduction; $32,500.00 x .02% = $650.00

$11,800.00 - $650.00 = $11,150.00 deduction.

Now the carrier actually paid Mr. Smith $13,000.00 but he only qualified for $11,150.00 This means Mr. Smith "may" owe tax on the difference which is
as follows; $13,000.00 - $11,150.00 = $1850.00

The above is a rather simplistic illustration of the concept I am explaining. The rest of Mr. Smiths return will have to be taken into account to determine if he actually owes the IRS any money or not.

 

Haha yeah,not to brag but I drove for jb doing the intermodal gig,up to 4 trucks a week different times.I started driving oversized loads in 1989,then years later I endup at jb-crazy nightmare. In a few weeks I,ll be able to drive a taxi,having only 1 arm that works,but I have a plan to make some extra cash,get a giant cooler and pack it with lard sandwichs,with buckets of gravy-for extra of course. Have ta look out for our,large ladys we have hear.hehe

 

First, I printed both of your answers for future reference. Thanks a ton.
Secondly, when I was paid per diem it was split out as you said. I had my pay include 2 portions with the non-taxable per diem deducted similar to a 401k contribution taken from the gross leaving a smaller, taxable federal wage. I was always told, and by several different CPA's, that the per diem was a totally separate pay and did not count into anything including an AGI floor. It's rather disconcerting that I've been doing it wrong for 20 years and have been getting bad advice from "tax professionals" including trucking specialists in the tax field in several different states for all of this time.

 

2011 was my first year driving and I have not yet filed my taxes. I have been contemplating going to a CPA but after reading this I think I am getting a handle on the per diem deduction, although I still have a couple of questions.

1. Do I use the per diem rate for my home location for the standardized deduction, which is 80% of $56.00 a day? I realize that I can go to the table and get the rate for every location I stayed at but I can see where that would be a PITA. Or is it simply the $56.00 per day?

2. On partial days, which is where I have the most confusion, sometimes I go out to pickup vehicles for delivery and return home at night before heading out the next day, mostly to the Atlanta area from Virginia. If I read correctly I understand that I can take 25% of the daily deduction for every six hour period I was out? Or would it be better to take $2.33 per hour ($56.00 / 24)?

 

i was under the impression that per diem implies when your away from home for the ngiht. i never heard anything about having to take a 10 hour break.

 

The rate being used for the Hi/lo method is actually $59.00 per day. You can use a lower amount if you like but it will reduce your deduction.

The key to qualifying for the per diem is to be away from your tax home for a requisite rest period before returning home. This is defined in FMCSA regs as a legal 10 hour break.

As for the calculation of partial days, you can choose any method you like over the course of the year but it must be consistently applied. Yes the old way of calculating partial days was in fact dividing the work day into 4 equal periods but the consensus among tax preparers today specializing in truck driver returns is now .75%.

In your example; "go out to pickup vehicles for delivery and return home at night before heading out the next day, mostly to the Atlanta area from Virginia," You would NOT be eligible for the per diem at all for that day.

Now had you left out on a Monday morning, took a 10 hour break away from your tax home and then returned home some time on Tuesday you would get credit for 2 partial days. 2 x .75% = 1.5 day allowable per diem deduction. The way you prove this deduction is through the use of a log book and/or hotel motel receipts (for those that do not have a truck equipped with a sleeper berth).

It is a common misunderstanding of the regs. I would suggest you review the following link for corroboration;

http://www.irs.gov/pub/irs-pdf/p463.pdf

You can also contact John Turner or Esta Klatzkin for answers from tax experts.

John Turner;

http://www.thetruckersaccountant.com/aboutus.shtml


Esta Klatzkin;

http://www.knowtaxes.com/

Both of these tax experts appear regularly on Sirius satellite radios "The Trucking Channel" and answer questions about truck driver tax returns. The number 1 question in every segment seems to address per diem questions.

 

Quite simple: because the company is paying (the driver) LESS in "taxable wages", they pay LESS toward Social Security, LESS toward Workers Compensation, LESS toward Unemployment Insurance, and many times; the driver PAYS the company for this "privledge".
So, if the driver gets hurt, his Workers Compensation is based on a percentage of what his TAXABLE income was.
If a driver files for UNEMPLOYMENT, his compensation is based on a percentage of his TAXABLE income.
If a driver files for Social Security; due to a dibilitating injury OR retirement, his benefits are based on his TAXABLE income.

AND; since his TAXABLE income is (artificially) LOWER, he does not have the borrowing power he would have if he was paid the full amount.

How do I know?
I was injured on the job at a company that "offered" a PER DEIM, and my WC payments were less than 2/3 of what they would have been if I had earned "straight" pay. AND my "borrowing" power was much smaller as well.

The ONLY one who benefited was the Company. Their share of Social Security payments were lower, their State costs were lower (Workers Comp and Unemployment)

 

So if I understand what you are saying correctly I can not claim any per diem for any day that I go out and come back home that night, even if it is 10 to 14 hours.

Also when you say .75% for a partial day out, ie the first and last day of a trip are you saying 75% of the $59.00 or 75% of the 80% that is allowed?

 

This is correct. Because you have not had a 10 hour break BEFORE returning to you tax home you are ineligible for the per diem for that particular day. This is why local drivers and many linehaul drivers do not qualify for the per diem. They are able to pack a lunch from their home rather than purchase their meals while away from home. Lets not forget the per diem was designed to offset the costs of "duplicating" a drivers meal expenses. Essentially you do not have access to the food you purchased from a grocery store, stored in a refrigerator, or a stove to cook a meal on while performing your duties as a truck driver.

Here is the formulae for determining partial days;

$59.00 x .80% = $47.20 x .75% = $35.40