Per Diem paid by company vs. not?

If a driver receives more per diem over the course of the year than what the standard meal deduction for transportation workers allows - say $5000 more - would the driver be in the clear legally if they report the excess per diem ($5000) as "other" income and pay the FICA and income tax on it as if the money was earned through freelance work, gambling winnings, etc.?

 

The short answer would be yes, and ask your tax preparer.

 

Companies "offer " (or require) participation in these "Per Diem" programs for one reason only, and that is to save THEMSELVES money.

 

So, instead of giving the government a "interest free loan" it's better to save the employer (tens of) thousands of dollars in tax, SSN, Unemployment and insurance liability annually and reduce the amount of money I would qualify to borrow?

Whateva'.....
go ahead and take your income reducing per diem. I am not participating.

 

can you prove they pay perdiem? if you can,report it on your taxes,cover YOUR butt!

 

There's just one thing you're saying here that doesn't make any sense. It's your rhetorical question "Can you eat on $8 a day?" In asking this, you seem to be mysteriously transforming an income tax amount (that you didn't have to pay) into a meal allotment, which it obviously isn't. The meal allotment is clearly still the same old $59 that it always was (for the past couple years), not the mere $8 that you saved in income tax.

Your posts regarding per diem otherwise look very accurate and informative to me, which makes it all the more mystifying that you'd make such a simple mistake in your reasoning. I find myself agreeing with everything else you say.

 

Do not forget to figure out what the company pays you and what you are allowed per day. Then take the difference and claim that. The companies will never come close to the $59 per day. If they claim over, they can be dropped out of the program.

You can also contact your phone company. Most will allow a professional discount. Verizon gives 8%.

Mark

 

On theory you can do that!

You will need to fill form 2106. In 2106 you will be able to claim the difference (actually 80% of that difference). The so figured amount will be reduced with 2% of your Adjusted Gross Income. The reduced (with the 2% floor) amount will become part of your Itemized deductions. And finally the total of all your itemized deductions will have to be more than the standard deduction to make any sense to itemize. So yes you can generally do it but whether you get any reduction on your taxes depends on too many other factors.

Toni, CPA

 

This is interesting question that I discuss in depth with all my clients interested in tax planning. The answer depends on many factors and individual circumstances. I will discuss the consequences for the driver only. If companies do befit from offering such plans I will just say that it will be smart on their behalf to offer the following choice – ‘Regular Plan’ # 37cpm; ‘Tax Advantage Plan’ # 39 cpm (29cpm + 10cpm per diem pay)

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TAX advantage do exists for the driver with properly set ‘Tax Advantage Plans’ – it comes in form of:
1. FICA tax savings up to the amount = 7.65%* days on the road*$59
2. Income tax savings – The amount of up to (days on the road*$59), is effectively excluded from your income for tax purposes. On the remaining income you can still use the available deductions - itemized or standard.
On the other hand with the regular plan - If you can deduct, the amount of your deduction is up to 80%* days on the road*$59 – 2% of your adjusted gross income! (Keep in mind that depending on the days on the road, your income and deductions, you might or might not be able to effectively deduct anything over your standard deduction.)

As most things in life everything comes with a price!

Your income for retirement will be less (not a big deal – put the money you saved on FICA taxes as a Roth or regular IRA and you will be better off).
Your income as the banks see it will be less.(You might not get a loan for that bigger house you like)
Your unemployment benefits might be decreased (this is not necessarily the case as you might qualify for max benefits even with the ‘lower’ pay!)


So to answer your question the ‘Tax Advantage Plans’ can be viable alternative depending on your individual circumstances. It can also be an awful choice.

Toni, CPA

 

Taxes are confusing...we should get rid of them all...I read this thread and started thinking I was getting it, and now I am more confused than ever...Calling tax guy tomorrow and seeing what we can find out from him...