Potential Co. has mandatory Per Deim?!?!?

Could have been if you liked ugly old women.

 

LOL, DB, you're one of a kind!

 

Has anyone actually done their own taxes out here? I don't want to hear "Well my accountant says.....". Your accountant is doing your taxes, but more than likely not educating you on the big picture. If you are a company driver, your expenses you can "write off" on your taxes does not make it worthwhile. If you did your own taxes, you would know that. If you have an accountant, they know it to, but will not tell you, since that would make you realize you don't need an accountant.

When you claim $59 a day, for let's say 320 days a year, you get $18,800. Now, you multiply that number by 80%, which brings it down to $15,104. Now you take that seemingly huge number, and set it aside. Now you add up all your other expenses from working, and get a grand total of your non-meal expenses. Let's say you spend $25 a week, on things like Pens, paper, work boots, gloves, and that sort of stuff. That would give you about $1,300. Then you multiply that number by 50%, which brings it down to $650. You add the $650 to your meal expenses, for a combined total of $19,400.

Holy cow!!! I am deducting $19,400 from my adjusted taxable income? No dummy, you are not! You write that number on line "X". Then you take your Adjusted GROSS income, and multiply it by 2%, or 4%, or whatever they tell you to. and put it on line "Y". If you are making a good income, let's say $55,000 a year, that amount on line "Y" might be as high as $4,000. Now you subtract line "Y" from line "X", and you get your real deduction.

Okay, so you say "But that still gives me a deduction of $15,000".....you are correct. BUT, that is only $10,000 more than the standard deduction, that you would get if you did not keep records of any expenses. Now go to the actual tax chart, and see how much of an impact that has on the amount of tax you pay. It might make a difference as high as $300 to $400 in some cases, or as little as $75 in other cases. Then take the cost of your accountant doing your taxes, plus all the monthly fees during the year, and suddenly you see that you are going through a lot of effort, to save very little money. Your accountant fees might even make you lose money in the long run.

I just hate to hear people talking as though $59, or $42, or even $26 is coming off their taxable amount each day, which is not the case. The truth of the matter is that maybe $2 a day is coming off their taxes, if anything at all. I myself don't think it is worth all the trouble to keep the records, to save $2 a day. I would just save that amount by drinking one less soda each day.

I am not an accountant, and I am sure there are all sorts of holes in the statement I make here, but it is closer to the truth than your accountant will ever let you know.

If you are a company driver, it almost NEVER benefits you to itemize your deductions. Anyone who tells you different is not as all-knowing as they might act. If you are an Owner/Operator, you might be smart to itemize your deductions, but you don't need an accountant for that. There are countless computer programs out there these days, that will let you track your expenses for each day, and figure your taxes at the end of the year.

A company that pays you Per Diem pay takes all the confusion out of the situation for you, but may be giving you a benefit you did not need to begin with. If you are not sure of all the pros and cons of the situation, then read as much information as you can on the subject, then decide for yourself. For most drivers, the cons far outweigh the pros on Per Diem, but that is for you to decide.

 

I do and prepare many others as well.

 

Using your numbers... Single company driver making $55,000/year, staying out 320 days, & claiming nothing else...


Take home pay:
1) Company per diem (no admin fee): $46,886.37
2) Company per diem (2cpm admin fee): $44,859.80
3) Driver itemize per diem: $44,614.75
4) Standard deduction only: $42,638.75



Itemized per diem:
AGI: $55,000
2% AGI: $1,100
Per diem: $18,880 (of which 80% -- or $15,104 is deductible)
Taxable income: $40,996 = (60,000 - [15104-1100] )
Fed tax owed w/ per diem: $6,177.75
Medicare/SS owed: $4,207.50
Take-home pay of $44,614.75

vs

Fed tax owed standard deduction (no per diem claimed): $8,153.75 (+ $4207.50 ss/medicare) for a take-home pay of $42,638.75

Difference: $1976 (or a daily tax savings of $6.18 )



Same driver is paid company per diem (company charges 2cpm admin fee). Drives 131,000 miles/year and is paid 30cpm base plus 10cpm per diem.

Gross: $52,400 (basically 55,000 less a 2cpm "administrative fee" for per diem)
Adjusted Gross: $39,300
standard deduction: $6,100
Taxable income: $33,200
Fed tax owed: $4533.75
SS/Med: $3,006.45
for a take-home pay of $44,859.80



Same driver not charged 2cpm admin fee:

Gross: $55,020
Adjusted Gross: $41,920
standard deduction: $6100
taxable income: $35820
Fed tax owed: $4926.75
SS/Med: $3,206.88
for a take-home pay of $46,886.37

 

Well Said!

 

Just to be clear where I am coming from. The Per Diem itself is not a deal killer. I would consider working for a company that had it, if other factors made it worthwhile. Forcing drivers who do not want it, to take it, is the bad part in my view. Even so, I would deal with it, if I was being paid well enough.

Some companies use the whole Per Diem thing as a way of putting lipstick on a Pig, if you know what I am saying.

 

As Truck-N-Tech just said, if driving is your only source of income and your spouse has a similar type job then having a CPA doing your taxes can possibly cost you more than it saves in the long run. Personally I have a few other interests that cause my personal tax situation to be a little more complicated than I'm willing to tackle so I do have a CPA doing my taxes every 90 days so I can make my estimated payments on time and without penalty at the end of the year.

There are good reasons for both sides of the argument and your personal situation should determine which works best for you. However if your looking at companies and one pays forced per-diem and the other doesn't then you need to look at both sides of the equation and decide which works best in your particular situation.

 

Moderators....you should put this post on the Dock and save it there, as this is probably the best example of how per diem works. It is complicated but, this shows how it works with real numbers. This is one of those questions that newbies have and even experienced drivers may not totally understand. Thanks.