How Per Diem works now

Discussion in 'Trucker Taxes and Truck Financing' started by Farmerbob1, Jul 31, 2018.

  1. MysticHZ

    MysticHZ Road Train Member

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    Actually ... Kinda, sorta ... well, no.

    A statutory employee, is an employee. Not a contractor. But there a very specific requirements. The employee's job is to generate revenue for the company and their compensation and only compensaton, is a cut of that revenue. All expenses incurred in generating that revenue is the responsibility of the employee.

    The employer still has to withhold all taxes for the employee, including SSN.
     
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  3. STexan

    STexan Road Train Member

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    If I’m not mistaken, the term “per diem” does appear on any IRS form. Per diem (in it’s correct definition) is not available as a deduction because it’s not a tangible “expense”.

    So what’s “not quite right” in that post? I was assuming we were talking about from the driver’s perspective.
     
    Last edited: Oct 10, 2018
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  4. Accidental Trucker

    Accidental Trucker Road Train Member

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    @STexan, this gets into the nerdy details of taxes, but what is routinely called "per diem" in the transportation industry is actually "Meals and Incidental Expenses" in the tax code, and ONLY available to those subject to HOS regulations (drivers and train engineers). It reflects meals AND incidental expenses, such as showers, that other workers would not have.

    What the tax code refers to as "per diem" is a daily meal allowance for people traveling for work purposes for meals, and is a standard re-imbursement, based on which city or region you travel to.

    M&IE on the other hand is a (higher) blanker rate nationally (and a separate rate for Canada).

    The two are easily confused. M&IE in the past could be taken as an "un-reimbursed employee expense", because the standard rate is the accepted level of expense drivers incur. Since ALL un-reimbursed employee expenses have been taken away in lieu of the new, higher standard deduction, EMPLOYEES have no way to deduct M&IE.

    Since businesses can still deduct all expenses and have to, on their schedule C, M&IE are still an option for O/O's. For drivers, the only way to stay on the gravy train is to have the company separate their pay into "pay" and "reimbursed expenses (i.e.. M&IE), which can be done in any rate the company chooses, as long as it is less than the IRS M&IE maximum daily rate.

    So, in short, the transportation version of "per diem" ,M&IE, IS an expense, and is NOT the "per diem" in the tax code for business travelers.
     
  5. Farmerbob1

    Farmerbob1 Road Train Member

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    A statutory employee uses a schedule c tax form. The employer also does not pay unemployment insurance for them. They are a 'statutory employee' not an 'employee.' That extra word, 'statutory' has very significant meaning to the IRS.

    I cannot tell you all the differences between these two wage earner types, but one of them can itemize on a schedule c, indicating they are self-employed, and the other cannot.

    I have no idea why the 'statutory employee' class of wage earner exists, but I imagine that a real tax nerd could enlighten us.
     
  6. MysticHZ

    MysticHZ Road Train Member

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    Trying to enlighten you ... Agian, a statutory employee is an employee. The employer has all the same obligations as they do with a regular employee ...

    The reason a statutory exists is the nature of thier job. They have to generate revenue for the employer and they are compensated only when they generate revenue. ... But they are also responsible for all thier expenses to generate that revenue ... Need a phone you pay. Need to travel to a client, you pay. Need to get copies, you pay. Need a lap top, you pay.

    The IRS created the statutory class so they can write off the expenses of generating thier income.

    In my best year I made about $65k ... and I spent over $10k to generate that income.
     
  7. Farmerbob1

    Farmerbob1 Road Train Member

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    Yes. I understand that. However, functionally, you are self employed. That is why you file a schedule c, which is a tax document for income generated by self-employed individuals.

    The fact that the IRS created a separate class of wage earner for 'statutory employees', and requires them to fill out alternate tax documents via alternate rules and guidelines means they are not employees. They are statutory employees.

    Also note. Employers do not pay for unemployment insurance for statutory employees.
     
  8. Bry

    Bry Light Load Member

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    I'm very late to this per diem party, but just wanted to say that I have done my own taxes for years and as a company driver was blindsided by the new rules last year that basically seemed like rape! I usually got refunds of thousands of dollars and barely got a few hundred dollars refunded last year!

    So after some research, I am a big believer in per diem now; also pumping up the 401k, to save on taxes.

    IF I were very near retirement and felt I needed to bump up my social security payment which heavily calculates one's highest five years of income, I might skip per diem; but having all those extra thousands of dollars now instead of seeing them disappear into a tax black hole makes a lot of sense to me. As others have pointed out, all that extra money that isn't lost in the various taxes can be used to pile up for a house/land down payment, to put into a Roth IRA, buy some precious metals, or whatever else makes financial sense.
     
  9. shoe128

    shoe128 Bobtail Member

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    You need to read up on it more.if your com.pay a co.driver perform.its a tax brake for the employer but the worker pays taxes at the end of the year on it.
    Not good for the most part
     
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  10. McCauley

    McCauley Medium Load Member

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    Huh? I think you're saying you pay taxes on money that is paid to you as per diem. You don't.
     
  11. Farmerbob1

    Farmerbob1 Road Train Member

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    If the wages are explicitly indicated to be separate, then you are taxed on the base rate, other income (detention, etc.) BUT not the PerDiem pay.

    If the owner simply pays you a straight mileage rate without pulling the PerDiem out as a separate category, then an employee is screwed and has to pay taxes on all of the wages paid.

    That's why it is critical today for employee drivers to have their PerDiem wages split off. Even if the company charges you a couple bucks per check to do it, it makes an enormous difference at the end of the year.
     
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