Per Diem paid by company vs. not?

Discussion in 'Trucker Taxes and Truck Financing' started by Buckeye 'bedder, Oct 11, 2010.

  1. Buckeye 'bedder

    Buckeye 'bedder Road Train Member

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    I am confused about per diem pay that is offered by a company. The company gives you a choice: A "Tax Advantage plan" where a driver gets .37 cpm of which ".10 cents of that rate is tax free." So the driver receives .27cpm and the other .10 cent is basically your daily per diem pay? If another company offers a driver .39cpm and in addition to their base .cpm pay, the driver can also claim an additional $58.00 per day at tax time from Uncle Sam why would anyone sign up with a company who pays der diem pay included in a .cpm rate? Isn't this basically taking $58.00 a day on the road out of your pocket, and into the company's? Someone help me with this please.

    Don
     
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  3. celticwolf

    celticwolf Road Train Member

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    Per Diem is NOW.. Tax time is April 15th.. Per Diem isn't paid by the company. It is by IRS law a portion of your pay that can be tax free. You are still earning $0.37 per mile. When it comes to filing your W-2 will show a taxable income of X dollars and a total gross of X+Y Dollars. The IRS only cares about X.

    As I said before, the IRS knows you are going to claim your expenses anyway, so they just allow it to be tax free now when you need the money and not make you wait for your tax return.
     
  4. canuck in da truck

    canuck in da truck Road Train Member

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    company A is only paying you 27 amile and adding your 10 cents a mile to make it look good
    company B is paying 39 a mile off the bat--then you get to claim your whole per diem at year end
    not hard to figure out which is better
     
  5. ZippyNH

    ZippyNH Medium Load Member

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    And if you apply foe unemployment, a loan, or anything else that relies on you reported income...you just screwed youself....you will be reporting an artfially low income....this will affect your retirement too.....
    Like it has been said...the company saves on their portion of the taxes....so they save $$ by you taking it!!
     
  6. celticwolf

    celticwolf Road Train Member

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    Zippy I have lived off of Per Diem for years when working IT. Never had a problem getting the salaries I wanted because of it.

    As for your Social Security it depends on if the per diem is deducted before or after FICA/FUTA/FIT

    The biggest issue is making sure that what ever Per Diem they pay you it can not exceed $59.00 a day. At $0.10 per mile( 590 miles) and at 65 MPH that is just shy of 10 hours.

    Unemployment is on the actual gross. That I know since I have been collecting unemployment now for quite some time. It's capped at a certain level regardless of how much you make. That problem I ran into every time I collected unemployment between contracts. My other reason for leaving I.T. I want job :)

    Now if'n people were smart, they put that $59.00 a day into a 401K and make out much better when they retire. Just my not so humble opinion.
     
    Last edited: Oct 11, 2010
  7. thelastamericanhippy

    thelastamericanhippy Road Train Member

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  8. Buckeye 'bedder

    Buckeye 'bedder Road Train Member

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    Canuck:

    That is what I thought! Why do that when I can get the .39cpm AND the IRS allows me $58 a day while on the road. Why would a company think a driver would go for that. Tricky in a way.

    Don
     
  9. ZippyNH

    ZippyNH Medium Load Member

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    `
    In trucking perdiem is deducted BEFORE FICA/FUTA/FIT (when the company does it)....just like many benefits at numerous company's....
    I spent the last 10+ years of my life getting Per-Diem.....as a pilot...
    But the reporting of what you will make was more honest...we got our regular pay, and a second paycheck/deposit for the per-Diem.
    That $59 per day (what ever the MAX federal non taxable per-diem was with no receipts) did add up quickly....but it was an addition...NOT in lieu of pay...
    The problem is it SHOULD BE A FLAT AMOUNT FOR EVERYDAY YOU ARE AWAY FROM HOME.....NOT A % of your daily income....the concept of per-Diem is it pays for things on the road, that you would not have had to pay for at home....but with the .09 CPM per-Diem...you get a variable amount, based upon how much you work. If a company was serious about the intended purpose of per-Diem, it would be paid at a flat daily rate.:biggrin_2558:
    Your suggestion of the retirement is a good one...but very few folks have the ability to do that (most folks are not planners)...most folks learn to live on what they make....and it all disappears....into the vending machines, video games, strip clubs, chrome shops, and CB shops......

    The folks that Per-diem helps are the ones who who a % of their income to an EX for alimony, child-support, or other court ordered payments, such as judgments. That and lowing government AND private insurance payment to you in the future....Do you have long or short term disability? It is based off your TAXABLE income....so you get less..same for unemployment, Social Security, etc....

    When you are making 60K per year, loosing 10K per-Diem taxable income might be a plus...but if you are making 25-35K like most first year company truckers...you stand a very good chance of loosing $$ in exchange for helping a company use an accounting trick to make more $$. And how many company drivers are making 60k+ a year....? Not many...a few...but not nearly as many as trucking school advertising might lead you to believe.....

    IMO places that let you do Per-diem for the first 90 days to maximize you take home when you are training, often only making $350 a week (less than most folks unemployment), and then let you choose in or out of the per-diem plan are actually doing you a favor, cause it helps you survive in the short term, then lets you opt-out...the best of both worlds!!:biggrin_25514:

    The BEST way to avoid this issue, is to take per-Diem when you do your OWN TAXES at the end of the year....this is after most of your taxes are paid (by type, not by $$), before before the federal taxes are done...so you MAX per-Diem is the perfect #, and YOU DO NOT TAKE A HIT ON UNEMPLOYMENT, RETIREMENT, OR SOCIAL SECURITY!! You have already bought in at a higher income level...and you JUST AVOID THE FEDERAL TAXES!:biggrin_25522:
    You just need to have person do your taxes that know how to do taxes for truckers...there is plenty of info on to have this done 100% legally, and a sponsor/supporter or two of this site that sell services to do it!!
     
    Last edited: Oct 11, 2010
  10. CondoCruiser

    CondoCruiser The Legend

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    What it boils down to is you save about $6 a day in tax money. That's 4 hotdogs and a drink. :)

    I worked gov't jobs before on the road and we got per diem. You got the full amount tax free. I forget, it was like a $300-400 seperate check.

    Just another way the American Trucker is getting ripped off.

    I'm a company driver and I still deduct the standard travel amount from what is shown on my W-2. IRS never said a word.
     
  11. spork.man

    spork.man Light Load Member

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    This is always a hot-topic issue.

    If someone is offering pay that is $.39 per mile versus $.30 per mile plus $.09 per diem, the gross pay is the same. The tax effect is not. If you take the $.39 per mile and back out the effective per diem rate, you will arrive at about a taxable rate of $.30 per mile all things being equal.

    If you are concerned about unemployment pay, check with your state agency to see what the maximum unemployment payment is and what is the minimum amount needed to reach that rate. It probably won't be much to reach the minimum amount of pay to reach the maximum amount of unemployment.

    Next, you need to consider what you think about Social Security and Medicare. You are essentially lowering your income so your contributions to both government programs will be decreased. If you think SS and Medicare are good, you probably don't want to do the per-diem because you're going to be taxed for the services based on your taxable income on each check which will be higher than having per-diem pay. You'll have a smaller paycheck.

    Taking per diem means you get a higher net paycheck, contribute less towards SS and Medicare and if you don't make enough, receive smaller unemployment benefits.

    But remember - the per diem rate is something like $59.00 per day HOWEVER, the actual deduction come tax time is something like 80% of that amount. So the effective per diem is something like $48 per day that is not taxable.

    I personally think Social Security and Medicare are a joke and a wasted method of employing my investments in my future. The returns from simply sticking money in a qualified retirement plan are much better and the future of that retirement plan is far more certain than the feasibility and benefit payments of our current SS and Medicare platform. But rather than start an argument I'd just like to say: take the time to determine what would be best for YOU. At the end of the day, you are going to be wearing your shoes, not any of us.
     
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