per diem - good thing or bad thing?

Sorry, I didn't read/see this was a Prime thread.
Many companies that offer a choice between non and per diem,The cpm seems to be 5+ cpm less for the per diem

 

There is no charge for per diem at Prime, and there shouldn't be anywhere. Personally, I believe its a way to scam the government out of tax dollars, but I have absolutely no complaints about that, as long as they can get away with it. Any company that charges you for choosing a per diem option, well thats another scam in my opinion. They want to charge you so they can save money? Yeah, that sounds about right and it sounds like a scam to me.

I'll take all the per diem I can get. Its tax free money. You know another way to get tax free money? If so, take all you can get. Its really that simple.

There are of course arguments against the idea, but personally, I don't buy any of them. Here are a few...

Since my taxable income is reduced, the total dollar amount for a loan I could qualify for will be reduced.

Not true. If it is, get a new bank. As long as you can prove that you are getting the money each week, and you can, the bank will consider the per diem amounts. Been there done that.

Since my taxable income is reduced, my social security contributions will be reduced which could affect what I may receive some day if the program is still around then.

Actually this sounds like a pretty good one, but not so much. While it is possible that your social security check could be reduced by a small amount, its possible, but who cares. Did you forget about all of that tax free money you are getting? If you are really concerned about your check being reduced, here's what you can do. Do some research, get out your calculator, call the Social Security folks, whatever you need to do. When and if you determine that your social security check will be reduced, whatever that amount is, double it just to be safe. Then out of the money you saved by getting all that tax free money, simply make an additional weekly deposit into your retirement account. You'll come out ahead and still have tax free money left over.

Since my taxable income is reduced, if I get hurt on the job, any benefits will be reduced because they will be based on a lower income.

Absolutely true. But again, you have tax free money you can choose to use for this purpose should you so desire. Buy the disability insurance. Even after this and putting extra into your retirement account, you're still ahead.

 

It's actually not. You're entitled to the deduction anyway when you itemize; per diem payment gives you the option to take the deduction before you file your return. Similar to your insurance premiums and your 401(k) contribution being pre-tax.

Agreed.

Again, you're entitled to the deduction one way or another. Better to NOT take the per diem option, decrease your w-4 tax withholding, and itemize when you file, taking the $56(?) deduction for each day you're out. You still get a larger check due to decreasing your withholding through your w-4.

YMMV, check with your tax professional before heeding this or any advice found on the Interwebz.

 

There are alot of people who cannot itemize. Then they should look at all options as well.

 

An argument can be made for not taking the per diem option if you are able to itemize. Thats not me though, for the first time in the last 20 years I was not able to itemize, a situation which probably applies to a lot of drivers.

But I still don't like that argument either and would never choose to not take the per diem option. And like you said YMMV, and as always, check with your tax professional. I checked with mine, and talked to the folks at Prime too. Both of those tax professionals were in agreement. Nothing is better than tax free money. "Take all you can get" was the quote I was given. The guy at Prime did say however, that it was "close" as to whether you could actually come out ahead by not taking the per diem option.

And just based on my past personal experience with the IRS, being audited, back in the days when my tax returns were regularly well over 100 pages, the less complications, the better. I'll just take the tax free money.

As for the scam reference, technically its not a scam, but its close enough in my mind to consider it one. Don't get me wrong, I would do the very same thing if I were in Prime's position. But it is after all, a way to avoid paying a portion of the social security tax, unemployment compensation, and workmans compensation on their employees. A fine line perhaps, but apparently legal.

Similar to the whole independent contractor scam. Its a huge scam in this country, and again, its simply a way of avoiding the payment of taxes. I wonder if thats why they are so high? In any case, as it relates to Prime, again I would do the very same thing they are doing as long as they let me get away with it.

As a lease operator with Prime, you live by their rules and only do work for them. Another fine line obviously, because what I have described here, meets the classic definition of an employee, according to the IRS. What I have been told by the IRS, is that what they are looking for is a situation where an independent contractor conducts his business with more than one company, or is at least in a position to do so.

So if I'm leasing a truck and hauling freight for several different companies, doing things as I please, clearly I'm an independent contractor. The same applies for any type of business. As long as you are doing business with more than one company and or have the freedom to do so as you please, the IRS considers you an independent contractor. Thats what they told me anyway.

I'm certain that Prime and their legal team have found the appropriate loopholes that allow them to call their employees, which is substantially what they are, independent contractors. Just sour grapes on my part mainly. I always had to pay all the required taxes which at least to a small degree explains why I'm no longer in the employee business. Its tough to find good help? Yeah, and the taxes will kill you unless you can find a way around them.

 

I am confused. So if you take the per diem you have untaxable income i understand that. If say its 8 CPM you lose that off your top. HOWEVER my question is if you dont are you just taxed on the 8 CPM (or what ever per diem is)

 

If I'm wrong, someone please correct me. With Prime's per diem option, you don't lose anything. You're paid 8cpm as per diem, which means that you don't have to pay tax on that 8cpm. Your take-home paycheck is bigger as a result. The benefit to Prime is that they don't have to pay tax on that 8cpm either.

If you elect NOT to take per diem, then your entire cpm pay is taxable.

 

Prime's per diem is not an option for the company drivers. The 8cpm is paid on a separate line on the settlement.

 

But u have to pay the taxes back at the end of the year right?

 

No. You pay no taxes on per diem, ever.

But my question is: As a company driver receiving Prime's cpm per diem, can I add my per diem from Prime back into Taxable Gross, if I itemize, and instead use the $59/day method?