Help understanding Per diem

You are right. I was talking about the standard deduction on 2106. I didn't say anything about itemizing anything on schedule A. I wasn't implying you could take both. It's still, in my humble opinion, a bad idea to let a company mess with your taxes. I fill out a W4 form and want my taxes withheld on my entire earnings accordingly. Due to many variables outside the companies pervue, there is no way for them to say they are doing you a favor. Taxes are unique to each individuals situation. Even if they don't charge administration fees, they aren't doing you a favor and there are numerous examples of how it hurts you in various ways.

 

I don't want my taxes held out accordingly, I need my money more then sam does.

I receive or pay a small amount every year. And the only thing i got going for me, is per diem.

 

Ok here is the skinny on Per Diem. When you take PD you are allowing the company to give you up front a little of your tax money back by not including the PD amount in your everyday taxable income that is reportable to the IRS. This is usually based in mileage. If you don't drive a lot of miles, then this is a bad deal for you as was mentioned earlier. Especially if there is an administrative fee involved. By allowing a company to reclassify your regular income as an expense instead of income, it lowers their tax liability as well because they are not paying FICA taxes on it. It instead becomes becomes just a regular deduduction for them and deprives you of the deduction at the end of the year. Anything that benefits the company at the expense of the driver, I am opposed to!

Remember, you are recieving the income deduction now which lowers your taxable income now instead of claiming it on your 1040 and thus recieving the deduction at the end of the year. Which would probably be larger. It is of no benefit to you to have them give it to you as a separate payroll reimbursement because it is not a reimbursement. It is part of your regular pay that is being accounted for differently, and to their advantage, on your company's books. Per Diem is intended to be an additional amount given to employees that work away from home. It is not intended to be taken out of your standard pay package and then redistributed on a separate line item.

 

This is from my CPA-
You can still claim the "standard" deduction at the end of the year, then you subtract the amount you received in Per Diem pay. If the amount of the "standard" deduction is higher than what your Per Diem benefits were then you take the additional deduction. If however your Per Diem comes out higher than the "standard" allowance you say nothing and you made out better with Per Diem.

So my opinion-
Just because your paid Per Diem does not preclude you from taking the standard allowance. You cannot take both but you absolutely can figure the standard allowance and figure out if there is more money left on the table.

Everyone has an opinion about Per Diem however till a certified accountant comes on here, takes your exact position and analyzes it then all your getting from this forum is an opinion and often based on nothing more that parroting an opinion someone heard.

I have been paid Per Diem in the past and my company paid a very high amount. Because of that the amount of Per Diem I was paid the benefit to me was much higher than the standard deduction. Now my company did not have an "administrative" fee so it was 100% benefit for me. A company that charges you to do Per Diem is a thief because there is NOTHING administrative needed to pay Per Diem, it's a cut in pay!!

I pay a real CPA to do my taxes, have been audited a few times and only one time has the IRS found an error and that one was in my favor. Doing your taxes yourself or taking them to the guy at the pop-up desk in Wal-Mart is asking for trouble when it comes to trucking. Your leaving $100's on the table. When people come on here and rage about Per Diem 99% of the time it's because they double dipped, took Per Diem pay then took the full standard deduction then got caught.

 

If you are away from home, more than 100 miles for the day (*Entire 24 hours) and can provide your tax agent with the log book stack... count up the days and apply all of them to whatever the rate IRS gives you against your taxes.

If memory serves one year we were gone 306 days total (Bye bye home...) and times 46 some odd dollars a day was in our favor against our taxes on 67K. We had a banner year that year. One of the #### few.

To us that was how it worked out anyhow.

Per diem in all the other years was a company thing and really did not apply to my, our taxes since we took the standard deduction. Not the itemized like that one year. We did however pay into both state and federal so that there is several thousand ready to go unspent in refunds each year. So no matter how much Arkansas taxed us (And boy did they ever....) we had enough to deal with them.

 

You are absolutely right. But an accountant will not come on here and take a position one way or the other, because, like I said, all tax situations are different. I agree with you 100 percent about using a good CPA not the seasonal tax preparers. I must have went to the wrong tax preparer that one year I mentioned in an earlier post. At the end of the year, nothing was in my favor. When that accountant figured everything out, I basically had underpaid, due to the per diem junk. They had declared far more as pretax income than they should have. Based on the number of days I was out, the standard deduction I was entitled by tax law was way smaller. I ended up paying the difference. It didn't work in my favor at all. Even if the accountant made a booboo that cost me money, I still stand on the opinion that a company doesnt have any business dinking with my tax situation.

 

Thats what I was trying to say, but you explained it much better. Thank you.

 

Yes, you can always chose whether you want to itemize or take the standard deduction. You cannot do both. If the company does not pay per diem, a company driver paid on w2 can only claim it by itemizing (and for an OTR driver out 300 days, we're talking about $15,000 in per diem)

A driver paid company per diem CAN still take the standard deduction. They get both. This is a $6300-12,600 (single vs married) advantage.

 

Not true. A company driver can take the standard deduction at tax time. They do not have to itemize. I do it every year. Just have to have log records to show the number of days out. A company per diem program has no effect on that. You can still take the standard deduction or itemize. Not both. All a company per diem program does is overly complicate things with no real gain for a driver. The only gains are for the company. Go back and read this entire tread. What these companies call per diem pay is neither per diem nor is it pay. It is a shell game designed to confuse a driver into thinking he gets more pay and gets tax advantages, neither of which is true. They benefit the company way more than they'd benefit the driver, even in the super rare instances where the driver does perceive a benefit.