can some one please explain per diem pay??

RoadKill,

Thanks for the response, you seem to know about this. Let me ask you one more question as I'm sure I'm starting to understand it now. I draw residual/retirement income of $45K to $50K per year and the wife makes about $35K. My question is if I make $35K to $50K per year driving, I wonder if taking the Per Diem may help to lower my tax bracket, I know what happens when you make $100K plus the taxes keep going start the roof. I guess I should ask my accountant, just hate to it cost money every time I ask anything. Of course having the extra tax write offs would probaly be more benficial. I don't mind keeping reciepts, I have to Itimize currently with taxes anyway. I write off PARTS OF phone, mortage, electric, gas and meals already because I'm considered an Independent Consultant with my company.

Thanks for all your advice.
Rich

 

It MAY help put you into a lower Tax Bracket, you would just have to examine the figures both ways. It seems in your case, having a higher/lower taxable income (from Per Diem) wouldn't matter. But if you itemize EVERYTHING you put in that truck, it can greatly reduce your tax debt at tax time. Some examples of items you can deduct include but are not limited to are:
dog food (or cat food) if you have a pet in your truck
cell phone
laptop computer
broad-band or WiFi connection for laptop
printer for laptop
software (anything you could use in trucking, like mapping or photo editing)
digital camera
coveralls
gloves
safety boots (steel toes)
Sat TV
Sat Radio
DVD movies
TV
CB radio
sheets
blankets
alarm clock
cleaning supplies
small vaccum cleaner
ATM fees

ect
ect
ect


What I do so I dont have to keep track of receipts is: I buy EVERYTHING with my debit card, so I have a statement each month

 

AWESOME REPLY ROADKILL,
Half those I never even thought of as deductions and I can see where a person would need most of them also to live on the road. I think I'll keep reciepts and visa staetments and forget the Per Diem. Thanks so much for all your help and I think I may have found an avenue to ask questions and get good answers if you don't mind from time to time. I work this right and it may save me thousands per year on taxes, since I'm a 1099 with my company I pay all my own taxes, but then again I really don't do anything for it so I guess I can't complain. But I can see where this would save me a bunch of money at the end of the year.

Thanks,
Rich

 

I am looking at a company for employment. They tell me they pay 2% per diem. Is this 2% of my gross per day? If I understand this correctly that is what you are saying.

 

Again, they don't "PAY" anything extra. What the "2% per diem" is: They DECUCT 2% from your pay (weekly or bi-monthly depending on your pay schedule) and tax the remaining money, then "GIVE" you the per diem back.

Example: Your GROSS pay is $500 per week. They DEDUCT $10 ($500 X .02), you are TAXED on the remaining $490.
Now, your TAXABLE income is $490, they pay Social Security Taxes, Unemployment Insurance, Workers Compensation all based on this $490.

http://www.landlinemag.com/Archives/2004/Nov2004/bottom_line/its_your_business.htm

 

Rich, I will probably make an enemy of Roadkill here and I am not trying to single him out but I have been following this thread and I would argue that you should be careful with some of the advice you are getting here. The couple hundred bucks you spend with a qualified CPA or accountant will at least net you back what you are charged. It always kills me when people will engage in a transaction for literally thousands or tens of thousands of dollars without paying an attorney a couple hundred to review the documents first.

What some people deduct on their returns and what is considered "ordinary and necessary" in a trade or business are sometimes vastly different. That is the measure that one should follow and one that the IRS will follow if your return is ever examined (audited). Remember, everything is deductible if you don't mind cheating and if your return is never examined (i.e., just because you got away with it, doesn't make it legal. The IRS doesn't examine every return they receive.).

Also, if you are a company employee, things are a little different. And don't think that unreimbursed employee business expenses are 100% deductible...they are not. They are filed on a Form 2106 but they are subject to 2% carve out based on your adjusted gross income. So, say your adjusted gross is $100K, you will have to have unreimbursed employee business expenses of more than $2000 before you get any benefit of the excess. The first $2000 merely gets you to the point that the rest will be deductible....it's like medical expenses which are subject to a 7.5% carveout. This excess will flow to your Schedule A. For some, who may not not own a home, thereby not having real estate taxes and mortgage interest to deduct, they would likely get no benefit from these items because they don't itemized their deductions.

I agree that the lion share of the list is perfectly fine. But, deducting dog food just because you have a pet with you???......that is like saying your mother-in-law's meals are deductible because she rides with you everywhere to keep you company. That smells. That is just one item from the list that is blantantly obvious....there were others. I think Satellite radio and TV is a stretch, making the TV a stretch. I would argue that these are absolutely ordinary....but are they necessary? Really? What is the business purpose there? The true measure is not what others are doing....it's what is standing up under IRS scutiny. To argue traffic reports...I think the IRS would look to your truck radio and your CB and your cell phone to argue that those give you ample access to traffic info.

Remember, if you are an O/O, the threshold is "ordinary and NECESSARY" for the carrying on of a trade or business. Not sure DVDs are a necessary item to allow you to operate a truck. If you are an employee, items deductible must be for the "convenience of the EMPLOYER". For example, you have an office in the home because the employer has more employees than the office can accomodate and you agree to work out of your home. Not for your convenience but for theirs. On the other hand, those who have an office at HQ or elsewhere, who merely telecommute to save time and expense of commuting, sorry, no deduction.

So, again, just because someone says that they deduct items and "they've never been audited"....not sure I would take that as authority...the IRS won't.

Also, I haven't thoroughly investigated the per diem issue but I do know that per diem is a non-accountable expense reimbursement plan. Accountable = saving receipts, submitting them to the employer, and employer cuts you a check. Non-accountable = you need not save receipts, show proof that you are travelling or out on the road, and the company can either pay you that amount, a portion of that amount or zero. Based on what the employer pays you, you can deduct the remainder based on the guidelines. I'll study up on this and reply back. I know it from a non-OTR situation but as stated earlier, I do know that it is different for OTRers.

 

Also, not to make a personal attack (I really intend no harm here) but don't guage one's knowledge by the size of his income tax refund. I would argue that serious adjustments should be made if the IRS is holding $5000 of a taxpayer's money only to give it back to them in April. I know, lot's of people use it as forced savings but it just pains me to see this.

The perfect scenario is to write a check to the Treasury every April for the max allowed without penalty.

Let the flames begin....

 

The THREAD was in relation to a question whether an employer offering a "PER DIEM" was a good idea, or not. I know of NO Companies that "cut you a check" for expences, either accountable or non-accountable.
NO companies I know of EVER "give away" money.

I explained exactly what happens, how these so-called "Per Diem" plans work. The employer DEDUCTS a (pre-tax) percentage from your check every week, they consider the remaining money as your "taxable" income, they TAX the remaining money, then "GIVE" you back the remaining moneys. (And act like they are doing you a favor)
I cautioned that since Workers Comp, Social Security and Unemployment was based on this artificially deflated "taxable" income, payments to employees due to injuries, unemployment and even death would be somewhat reduced, and that in most cases participating in an employer "sponsored" PER DIEM program wasn't a good idea. I also stated that in most cases the ONLY benefit to participating in a "PER DIEM" Program went to the employer thru lower costs for Workers Comp, Social Security and Unemployment Insurance.
And I ALSO stated that one way to lower the over-all taxes deducted is to claim more dependants, but I advise caution in doing so.

The rest was just MY experience with what is allowable tax deductions. You would be surprised what information you can get on what is, or is not allowed by visiting your local IRS office. People who travel away from home for LONG periods of time get deductions that people who stay close to home are not allowed.
And YES, I have been audited. Twice by the IRS (it reduced my refund by a couple hundred dollars) and three times by the State of Michigan.

Perhaps you should read ALL of my posts and remind me where I "flamed" anyone with whom I disagree'd with, I seem to have forgotten.

 

roadkill,
please accept my apologies...my suggestion that you would was out of line.
94nole

 

Apology accepted