Perplexed by forced per diem option?

Post #85 in this thread. Second paragraph.

 

What I know would take about 35 pages to tell you. Per Diem is an advance for rookies. Like a draw. It's all calculated in by the companies. Example : Truck 000 needs X $ to live each week. We pay him/her 1/4 over that, we make money, he is happy.

 

From my understanding the per diem will reduce your taxable income BUT also will hurt you for a loan of any type due to reduced wages from the reduction.
Per Diem also reduces your wages on your Social Security impacting your retirement by showing you made less than what you actually earned.
Per Diem will also hurt your benefits if you become injured and put on short or long term disability by reducing the amount of money you should be paid because your earnings have been reduced.
Per Diem lets the company take reduce their tax liabilities at your expense for the long term. And, as I read on this forum by a CPA Tax Professional, most of the companies are using the Per Diem illegal manner, which could also cost you penalties, interest, and possible attorney fees in the future.

Now I have a train of thought. If it is the tax shelter you are looking for to save the extra money, why not increase your 401K contribution to keep those pre-taxed savings and ADD to your retirement while also REDUCING your weekly taxable liabilities? You could line your own pockets on both ends this way because you get the upfront savings, the long term investment, plus you are STILL able to claim the IRS Approved Per Diem tax shelter and increase your tax refund. I am off base here?

Solo

 

I have no idea how other companies do it, but the TaxPhd is right as rain as far as how it is suppose to work, YES we do a forced Per Diem, YES we do save "some" money on payroll taxes, (so does the driver) but on our end that is it, that is the "only" benefit that we see.

As far as how the Per Diem is used toward pay, we settle up front with a driver on the CPM he/she will be making, THIS number is the drivers gross pay, at this point it has NOTHING TO DO WITH PD! AFTER, that gross number is calculated the number of days out times his/her PD rate is taken out of the gross number and set to the side.

Then taxes are figured on the money that is remaining, that and ONLY that is what taxes are paid on, after all of this, THEN the money that was set to the side for PD days out is then ADDED back into the taxed figure, together they add up to what the driver "takes home".

NO we do not charge one red cent for this to our drivers, in fact I could probably cut some hours out of our payroll dept. if we DIDN'T do PD.

I always think it is funny when a driver leaves us and then calls back to complain that where he now works they DON'T do PD and he is getting killed on taxes, but some people will always have something to complain about.



Stan

 

All I can say is you must have worked for some really shady companies, AND with some really gullible people.

 

Stan,

My company handles it exactly the same way.




Scott

 

Yeah Scott, there is no doubt that there is a lot of misinformation out there, there is also no doubt in my mind anyway, that there are some people/companies that have or have tried to take advantage of the situation by screwing a driver.

BUT, a lot of times it is just never correctly explained to the driver and some of these stories are like a bad joke in a crowded bar room.

You walk into a bar a tell a joke about a Priest, a Rabbi, and a Virgin, by the time you are ready to leave the bar a person walks up to you and tells you the same joke, except now it's about 3 different people and a totally different punch line.

BUT I will also say that some of this IS the DRIVERS FAULT, I can't tell you how many times I have brought a driver into my office to explain something and there just aren't the slightest bit interested in what I am trying to explain to them.

We go thru a lot of trouble here to make sure everything is right and above board, but some people really don't want the details, they just want a check!

Stan

 

This is correct.

Company paid per diem will result in more money in the driver's pocket. If the driver is smart, he will do what you are advocating - increase retirement contributions, and other savings.

 

My husband was on that "per diem" deal when he first started. How could anyone recommend that a driver put LESS money in their own pocket and more into the company's pocket? The per diem that the companies push is nothing but a rip off to the driver. It does NOT put more money in the driver's pocket. Been there, done that and won't do it again.