can some one please explain per diem pay??

I have questions about per diem. Can someone explain how this works and the Pros and Cons of it.

 

The biggest pro of figuring expenses by per diem is you don't have to save reciepts for everything, and chances are, it will be higher than your actual meal expenses per day anyway. The biggest con is you are limited by the federal dollar amount set for that particular year.

It works like this: using your logs you figure out how many days you were out (lets say 100), you multiply it by the established per diem amount (I can't remember what it was for last year, but for easy arithmatic, let's say it was $50), 100 X $50=$5000. Per federal guidelines you can only claim 75% of that on your taxes, so your deduction would be $3750.00.

So in looks like this:
days out 100
est. per diem X $500.00
=$5000.00
75% X .75
=$3750.00 amount you can claim on your taxes.

I've been doing my husdands and mine for 4 years now, and every year after I get them filed I spend weeks second guessing everything and stressing because I know there are legal deductions that I'm just unaware of. My recommendation to you would be to get an accountant. The expense of having one is a business deduction, and accountants specializing for truckers (owner op and company drivers) know all the deductions that we wouldn't even know were to look for.

 

So if I understand you lets say I drive 305 days with taking out TAH that's about $11,000 at 75% tax deduction if I'm on company per diem.

Or if I don't take Per Diem and drive with the extra 2 cents per mile that's about $2150.00 extra in income at 2500 miles per 43 week period with TAH, more if I don't take as much off or drive more miles. So basically I won't really save anything in the long run, by keeping reciepts and such on Per Diem. Might as well take the extra 2 cents per mile.

Correct me if I'm wrong here, I'm just about confused to tell you the truth.

 

Per Diem is a daily amount provided by your employer for your meals. Anytime you're needed to sleep away from home as part of the regular course of your job, you can claim per diem. The amount of per diem is different for truckers compared to other occupations that can also claim per diem. As mentioned there is a % adjustment that you can claim up to.

Per diem is not taxable income & doesn't show as earned income on your W2. Because it doesn't show as earned income, your yearly net pay is lower. Considerably lower.

Per diem can burn you in several scenarios.

First, it lowers your yearly net pay which means you are not as credit worthy as you might think. The bank or other lending institution doesn't want to know about per diem amounts, just what is marked as earned income on your W2.

Next, if you get hurt on the job & need Workman's Comp, the amount you receive from WC is based on earned income, not the per diem. You get way less WC.

Lastly & maybe most importantly, per diem is a great way for your employer to cheat you out of his obligation to pay his part of your Social Security payments. You don't pay SS taxes on per diem which means he just saved himself a ton of money in not contributing the full amount into your SS account.

The only plus side to per diem is when you are looking at child support payments or other wage garnishments. Because you only show the earned income, which is minus the per diem, you get out of court owing less per month.

You still need to keep receipts for all the other stuff you buy for the job. A portion of your cellphone, if used for business & personal is an expense you can deduct.

Anything you buy that will be consumed as part of your job is basically deductable. Cleaning products for your clothes, for the vehicle interior, some of the clothing itself if specifically necessary for the job. Your CB costs are likely deductable, a computer used in the course of the day for logging, directions etc. Subscriptions to trade publications might also be deductable. Office supplies other than what you are supplied with are deductable. I believe fax costs specific to the job are in there. I believe the money you spend on postage to send your paperwork & logs back to the shop are in there.

There's myriad deductions & you need a tax person who is well informed regarding trucking. Most non-trucking cpa's & tax people will get the per diem & other deductable amounts wrong on your taxes. You are allowed more than the typical per diem user.

All of the things I mentioned would be above & beyond the per diem so you need to keep the receipts for those.

Look around for people to recommend a good trucking oriented tax preparer. Ask around. Look in the T/S magazines for a starter. Be carefull even if you saw it in a trucking related mag.

Never, never use H&R Block to do trucking taxes. They cannot figure out regular taxes well enough so you know they can't do trucking specific taxes effectively.

I know of one trucking tax accountant/cpa. He is very well established & very learned. He finds the mistakes others make & gets you more money back...legally.

I won't post his name here but I can give it you in email if interested.

 

BobC

Thank you for the detailed explanation. I will take it all to heart. Seems like if you HATE Uncle Sam then take Per Diem, but if your dependent on Social Security at 65 then don't.

 

Well, you won't be hurting Uncle Sam. He gets his whether you like it or not.

But you will be hurting' yourself in many ways if you go with the per diem thing.

Perhaps, after looking over your finances with a good tax advisor, you might be ok with the per diem thing. Usually it's the other way around.

 

So if you take company per Diem that works out to 25 bucks a day.
Can you write off the difference between the 25.00 from the company and I think 58.00 the government allows or 75% of it.
Or is it one or the other?

 

Actually, the per diem rate for people subject to hours of service is $52 a day. You then get to claim 75% of that which works out to $39 a day in per diem.

In a couple year that will go to 80%.

IRS pub 463.

If your company is not giving you that, you'll need to file form 2106 I believe & do the math to get what the company didn't give you in per diem.

On the other hand, if the company credited your W2 with the amount they stuck you for, you probably paid taxes on it & the company had to pay their share of your SS taxes on it too. It may be better for you in the long run to show a little more in earned income & SS contributions than to go after that missing amount of per diem.

Best to review your tax situation with a qualified trucking type tax person to see which idea is better.

 

Do companies allow you to start and stop Per Diem yearly or is it once you sign up it's locked in?

 

The ONLY reason trucking companies "give" you a per-diem is to save themselves MONEY.
They TELL YOU, it saves YOU money that your paycheck will be bigger each week....THIS IS A LIE, your paycheck is not much bigger by taking the "PER-DIEM".
Let me back-track for a minute. They DON'T GIVE you a dime, they with-hold a percentage of your PRE-TAX income, tax the remaining money and give the PER-DIEM back.

So on your W-2, your TAXABLE INCOME is smaller than your ACTUAL INCOME.
This saves the Company $$$ in several ways.

1. They get to pay LESS for Workers Comp, try to collect short or long term disability and your disability is calcluated by using only your TAXABLE INCOME (see above)
2. They get to pay LESS for unemployment insurance. Try to collect Unemployment Insurance, and your payments are again based on your TAXABLE INCOME (see above)
3. They get to pay LESS for Social Security (see above)
4. They get to pay LESS for their share of Federal With-holding (see above)
5. PLUS....the Companies treat you like the Per-Diem was a GIFT and you should be greatful to get it.....

If you have the option, DO NOT take the per diem from your employer, it can come back and bite you in the backside if you really need it. Just learn how to do your own taxes, save ALL your receipts, save PROOF you drove as many days away from home as you claim (save your log books) and you will benefit by HIGHER WC payments if you get hurt, if you collect Unemployment, or Social Security in the future....PLUS get a HEFTY Tax Refund every year. I get between $3000 and $5000 in Federal refunds every year and several hundred State. If you would rather pay LESS taxes during the year, claim more exemptions on your W-4.