Perplexed by forced per diem option?

Word to the wise, I was "away" from home 340 days in 2010, I know, that sucks. However, you gotta do what you gotta do sometimes. Any who, I took the $59 per diem on my return. That's a HUGE deduction and red flag for our buddies at the IRS. In addition, I wrote off expenses related to my job, electronics, clothing, shoes, etc.

They recently audited me, however, I had no paper logs (I was on elogs) to "prove" I was out that many days. In addition, at the time, I didn't realize my company purges all electronic logs after 6 mos. In the interim, the IRS sent me a bill demanding $3,800.00!

Here's what I did:
1. Took their demand seriously

2. Obtained a letter from the company stated that none of my pay in 2010 was per diem.

3. Made copies of every weekly payroll stub and highlighted every single dispatch I was paid for showing I was out of my home base area.

4. Provided credit card statements showing various purchases I made and noted that I was out of my home base where purchases were made.

I received a letter today from them and they noted that I didn't owe them anything!

I'm sharing this as a potential warning to those who take large per diem deductions as a company employee. They are searching for $$$ anywhere they can get it. Make sure you keep current on your log print outs if you are on elogs.

 

Probably due to some bookkeeping they have in house where they class it as 150 plus as OTR and under as local. Not complying with the code though.

 

Ok here is my question. Hope you can follow. LOL. Truck driver.
My company takes out a dollar amount per week from my gross before taxes. Labeled as per diem. And then adds it back in after taxes. So no extra money is paid to me as far as them giving me a per diem amount, it's all my money to start with. So I'm lost when I read per diem is extra money a company pays you on top of your normal wages. Are they allowed to take my money out of the gross before taxes and then add it back in after taxes and call it per diem?
Hope this wasn't to confusous. LOL

 

Allowed? Yes. They are screwing you, though.

IDEALLY, and the way it works in every other industry, except trucking, where an employee travels away from home.....per diem is extra compensation to cover the living expenses you ring up by being away from home.

Many trucking companies pay 'per diem' as a way for THEM to save money, not you. If they are paying you per diem as a part of what would be your normal wage per mile, they are screwing you.

Small minds will never understand this, they see what may be extra (untaxed) money in a weekly paycheck and think they are getting a good deal, but if you get hurt, or on unemployment, or want to buy a house or car.....you will be screwed, and you can not take deductions for your road expenses (legally) on your federal taxes, if your company pays you per diem.

The company may be doing something that is legal, but they are screwing you. If they don't offer you a choice of per diem, or not, look for another company that doesn't play this game, or make sure you are really making a normal wage overall for this crap.

If some company wants to pay me per diem this way, they better be paying me 40 odd cents a mile, and whatever the per diem rate is, on top of the 40 whatever cents......not saying 'ten cents of your 40 a mile is per diem'.

 

Thanks, I'm paid 27% of the load gross not cpm. So what your saying is that they are just making it sound good to employees but are the ones benifiting from it by reducing their tax paid out. But also it makes it so I already got the deduction ea. week so now I don't have to do it at the end of the year right. So it makes it a wash. Which is ok with me providing I won't owe, lol. I'm a company driver so really no other deductions for me. I use ez pass and no lumper fees ever. But by them taking it from my gross and then adding back in is that legal. All they told us in orentation was that they do the max allowed by the irs and assuming they would pay us the amount not deduct it and then give it back made it confussing to me. So if I make 27% of a load gross with them doing this can someone tell me an example of what I truely make as the % rate by them doing this? Say I made 1000.00 this week and they take out 287.00 per diem from me before taxes and then pay it back to me after taxes. Never worked for a company that this before so confussed alittle.

 

Wherever you read this, they mis-spoke or were clueless. There is plenty of info provided with a google search on "driver per-diem". Most of the info is good, some if it is bad, but read enough and you'll begin to understand better. Usually with per-diem, not only will you come out financially poorer after tax time vs. no per-diem and itemizing, but the company actually siphons off some of your pay as a "payroll administrative fee" which is legal and boosts the company bottom line, at the expense of the driver.

 

I get back what they take out, every dollar. They take 287.00 before taxes then put back in 287.00 after taxes. No cost to me from them doing so. But does it hurt my end of the year at tax time is my question.

 

All depends on how the company calculates the per-diem amount. There are several ways they figure per-diem. But if you choose to itemize and not do per-diem, I believe is 80% of $59 is the amount you can itemize in 2012 as a standard meal allowance for all days away from home.

Say you're out 300 days/year ..
that's $14,160 for meals
then figure perhaps another $500 for the occasional motels (even if you have a sleeper in your truck)
then figure perhaps $400 cell phone allowance so your dispatcher can reach you in a t-call emergency while your moving
then figure another $400 for supplies, paid showers, etc, etc that are tax deductible

that's an amount you can deduct from your AGI to reduce your taxable income. but if you run on per diem, you will not be able to itemize these driver expenses. I'm not a CPA, and you need to do your own calculations. But general rule of thumb? virtually all per-diem drivers come out with less money at the end of the year, once taxes are filed vs. itemizing and taking all legal and allowable deductions.

 

It reduces your tax liability in that it lowers your total taxable pay, and lower numbers pay lower tax rates. And you are not paying state or local taxes on the lower amount too, if you have that where you live.
They are saving paying the matching taxes. The negative side to you is that it reduces your income level to social security, which could reduce your benefit level (if the system does not collapse) and by reducing your taxable gross it makes your paycheck seem smaller to those perhaps looking to give you a loan or mortgage.
What is totally wrong in my book is the companies that are charging the driver to administer this reduction in the company's tax liability. It's like them saying "we have to deduct from your pay, to pay you!" This is a true sign of a bottom feeder.

 

Having the per diem taken out does NOT eliminate your ability to itemize other deductions, but you have to have enough of them to meet the requirements for your income level.