Per Diem Pay For Truck Drivers

OK, if I understand this correctly (some days the fog lifts earlier than others) here is what's being said.

If you get $.30 per mile and you drive 120,000 mile in 300 days of driving or average 400 per drive day then you are due (in installments) 120,000 x .30 = $36,000 dollars. Now if the driver agrees, the company could pay some percentage of that (say 30% - let's keep the "3's" busy here) in "per diem" payments (30% of $36K = $10,800) or $10K+. And tax wise, that is not earned income, but per diem that is supposed to offset driver expenses accrued while on the road. Is this correct? The total received by the driver ends up the same just different tax implications and less "earned income" on the books for those who wish to go into debt with a bank, for whatever reason. Is this essentially how it works? I personally don't plan on buying anything substantial (except a funeral someday) so if I have it right I'd just as soon take the money and run and deprive some well deserving person their welfare check that month . . . do I have it even close to correct?

Stephen E. Birch

I think you have it. Depending on where you live and your situation, at that wage you could BE that well deserving person. Then again, you taking advantage of the government benefit you are entitled to through per diem is completely different than someone who works just as you described and qualifies for assistance of some sort.

Pretty much got it.

at that wage you could BE that well deserving person.

I am a very deserving person, thank you . . .

Stephen E. Birch

I guess I didn't lay the sarcasm on thick enough for you ? This has been a discussion of per diem pay and the benefits of taking it from your employer. I guess I missed the political debate sign at the door.

No, the sarcasm was there for all to see . . . and yes, I slipped a political statement in there as a bit of a sarcastic jab as well . . . couldn't help myself . . . sorry if I offended . . .

Stephen E. Birch

Here is what happened to me. Because of per diem , my state and federal withholding was a bit low. I didn't mind too much, because I had enough money to pay it. $347 to the Feds, and over $500 to the state. I would rather that amount be closer to zero either way, than over $300. I think if I take the deduction at the end of the year, I'll either get money back, or pay very little.

Dave

This sounds to me to be similar to the Advanced Earned Income Credit. It used to be that if you knew you were going to get the EIC, you could get a portion of it added to each paycheck through your employer. Of course, this meant that your refund would be much smaller because you, in essence, got a portion of your refund throughout the year. The government knows you can claim the $59 per day on your taxes, and the companies know it as well. So, they figure out how much of each paycheck would go towards that deduction and don't tax you on that amount. If they don't do it that way, they, and you, end up having to withhold more in taxes because your actual earned income ends up being more (on paper) than it would be if you waited to take the deduction at the end of the year. To me it sounds like a "six one way, half a dozen the other" situation for the driver, but it ends up saving the company money on quarterly taxes.

OK, if I understand this correctly (some days the fog lifts earlier than others) here is what's being said.

If you get $.30 per mile and you drive 120,000 mile in 300 days of driving or average 400 per drive day then you are due (in installments) 120,000 x .30 = $36,000 dollars. Now if the driver agrees, the company could pay some percentage of that (say 30% - let's keep the "3's" busy here) in "per diem" payments (30% of $36K = $10,800) or $10K+. And tax wise, that is not earned income, but per diem that is supposed to offset driver expenses accrued while on the road. Is this correct? The total received by the driver ends up the same just different tax implications and less "earned income" on the books for those who wish to go into debt with a bank, for whatever reason. Is this essentially how it works? I personally don't plan on buying anything substantial (except a funeral someday) so if I have it right I'd just as soon take the money and run and deprive some well deserving person their welfare check that month . . . do I have it even close to correct?

Stephen E. Birch

I'm a tax preparer for 8 years and here's how it breaks down .. I'm going to use a little different numbers because i already calculated this out for myself ( I am just now starting my trucking career) so here it is in a nut shell..

based on 3000 miles per week the company i am going to work for pays .30 cpm total ( starting pay ) they use .12 cpm as your per Diem pay based on that with out the allowance your gross pay would be 900.00 minus 134.50 fed wh 55.80 ss and 13.05 medicare nets you 696.65 for a single guy no dependents. before any other deductions for health ins. life ins. 410k etc.

with the per Diem allowance figured for you at those same 3000 miles your pay is as follows 3000 x.18 cpm base pay = 540.00 taxable minus 65.80 fed 33.48 ss 7.83 medicare for a net 432.89 plus the .12cpm per Diem of 360.00= 792.89 net pay, again single no dependents. before other deductions

so the weekly paycheck difference is 96.24 more in your check if the per Diem is allocated for you because you don't have taxes taken out of 360 dollars this will amount to $5004.48 over a full year

now the difference at then end of the tax is also affected this way ... with the per Diem you would have grossed $28,080.00 and paid in fed wh of $3422.00 ..your AGI with the standard Deduction and personal exemption ( using last years amounts) of 6100+3900=10,000 would be 18080.00 so the tax on that would be 2,265.00 and the refund on that ( not figuring any other credits to keep it simple and on this subject) would be $1,157.00

if you went without the per diem the gross pay for the year works out to 46,800.00 and subtract the personal exemption of 3900.00 and the allowed per diem deduction of 14,726 and your AGI ( Taxable income) is 21,180.00.. you would pay 2731.00 in tax so from your with holdings of 6994.00 the refund on that would be 4,263.00

I figure the total cash difference to your advantage is $1898.00 if you let the company account for your per diem for you based on those numbers and there are many variables but this is for demonstration purposes so keep that in mind.

where it may not be to your benefit is in your AGI reported for credit purposes 21,180.00 vs. 18,080 maybe not that big a deal but you must also consider your social security benefits at retirement or in the event you go on disability because the amount paid in will be 1160.00 less per year with the per diem plan ( that is also the amount the company saves by not having to pay in that match which is why they want that... it affects the bottom line 1160 x number of employees...it adds up)

so the questions to ask yourself are 1) Do i want the extra money in my weekly pay check ($96.24) 2) or do want a bigger refund at the end of the year ($4263.00 vs $1157) 3) do i want to obtain credit to buy a house or something else ( AGI of $21,180.00 vs. $18,080.00) 4) the extra cost of preparing a 1040 with itemized deductions over the 1040 EZ ( approx. $250.00 vs.$50.00) 5) Do I want to maximize my social security benefits or use the savings to put into a 401k or IRA?

Hey Patski, Now really frig with their minds and explain the age 70 rule on 401K's. No matter how you take it, you can't take it with you, so enjoy the ride while your above ground.