Per Diem explained in detail, please?

How per diem works (short version):

The Company reduces your taxable pay by 10 cents/mile.
They then pay you 8.5 cents/mile non-taxable.
They keep the 1.5 cents/mile for "administrative overhead".

Since less is being taken out for taxes, your weekly paycheck goes up a bit.

If you itemize your deductions, you would get the same tax benefit at the end of the year, but you get to keep the extra 1.5 cpm.

So by using the company per diem program, you make less money.

 

It goes up more than a bit. Not only do you get .10 per mile that's tax free but it also puts you in a lower tax bracket saving you even more. I make out like a bandit on PD and wouldn't do it any other way. I still remember the days when I worked on salary and was paying out $200 - $300 per week in taxes. I might of made more money then but I have more money now.

 

*boggle* By making less money, you have more?

That must be that new "common core" math that Bill Gates has been shoving into our collective orifices. The one where you solve math problems by drawing boxes and groups of dots, and move dots and turn dots into more dots and MOAR DOTS!

Sorry, but I learned math back when "calculus" was a branch of mathematics that study how functions change, and not a $2 word that means "strategy".

Let me try to explain this...

Say you do work to earn 30 dots. The government takes 10 of them to give to other people who don't work, leaving you with 20. Draw two boxes, putting 20 dots in one and 10 in the other.

With per diem, you earn the same 30 dots, but the company takes 9 of them and puts 8 of them in a locked box. The government takes 7 of the unlocked dots, leaving 14. However, you also get the 8 back that were in the locked box, leaving you with 22. The boxes and dots on this one is left as an exercise to the reader.

OK, so as a good little slave, you have two extra dots, which you promptly spend on some mutton and mead on your next home time.

Now, had you not been paying your company one dot for every unit of work to keep the government from confiscating three more dots, you could itemize your tax return and get back four or five of the dots the government took on payday. You can still itemize and maybe get a dot back, but the one you paid to your company is gone.

OK, since all this talk about dots has the World of Warcraft players back in Azeroth, I'd like to give a hearty In The Morning to those of you who actually could follow what I said, and picked up on the references...

 

Additionally, anyone who is paying the company to get paid less by way of per diem is short sighting themselves for the future. Lower earnings at the end of the year mean less paid into ones Social Security retirement for later in life (provided it still exists), and any other associated benefits related to earnings over the year/lifetime. CondoCruiser explained it quite well, and anyone who cannot see the con game in the bastardized system that companies are using, as explained, are hurting themselves overall. Sometimes, though, some have to learn the hard way or not learn at all.

 

Some of us don't give a hoot about social security because we were smart enough to plan for retirement instead.

 

So you just short yourself that option instead, dumb. Pray you never get inured to the point of disabled and find yourself in need of SSDI.

 

Taking the "Company Per Diem" option can be beneficial to a driver depending on their own personal financial/tax situation. UNLESS the company charges an "administrative fee" - then you have do figure out if the money you save in taxes is more or less than what you lose to the "administrative fee".

In my personal situation the difference in after tax income is negligible. However the impact to my potential Social Security and workman's comp is significant. Finally I ask myself "Who would I rather squander this money - the CEO or the government?"

Once you can answer all three of those points (after tax income, impact on SS etc., and who gets the "extra cash") then you're ready to make an informed decision.

 

Every company does per diem different. Not all companies charge an administration fee. I have never worked for a company who does.

Yes, you do get a $59 per day perdiem at the end of the year but you can actually still claim it if your accountant simply subtracts the amount of perdiem held out during the year from the total of the annual perdiem.

If you are older like me it will not affect your ssn but if you are young it is not advisable..that is if it is still around.

As far as credit goes like others have stated it has never affected me getting a loan and i buy a new car every 3 years.

Ask your accountant about your own situation

 

One last thing: With company per diem you can still claim the $6,000-$12,000 standard deduction at the end of the year. Without company per diem, you must itemize to claim it, forfeiting your ability to take the standard deduction. If you itemize anyway no big deal. But if you would not normally itemize, this means you pay an extra $1200-$2500/year in tax -- on top of the extra FICA.

Gentleroger is right -- there is no extra money being made, it is just shifting percentages between you, the government, & the company. And tow is right -- every company deals with per diem differently.

 

This is what is awesome about this forum ... You can choose your own kool aid and go from "no understanding" to subject matter expert in less than week ...