Per Diem Pay For Truck Drivers?

I am going to disagree with Rick about Social Security. Anyone who is depending on it to get them from retirement to death, is going to be in for a bad reality check one day. It would be best to make as much bring home now as and put it into a Roth IRA. Just my opinion.

As I said - might be delusional thinking to "count on it" for the youngsters here. For us 55+ types, it'll probably still be there in a decade.

Also - the "daily rate" is up to $63 per day as of 10/1/15. Keep in mind also - that you deduct 80% of that rate, not the whole $63.

So - for example - out 300 days X $63 per day = $18,900.00 X .8 = $15,120. This would be the DEDUCTION from your gross income (and the per diem untaxed income IS PART OF YOUR GROSS). Being that this deduction is LARGER than the "standard deduction" (single being $6,300, married/jointly being $12,500), you are going to have to ITEMIZE deductions anyways - which allows you to take all the other deductions pointed to in an article I linked to earlier.

You can GREATLY REDUCE your tax liability by itemizing - but YOU HAVE TO DOCUMENT. This includes getting COPIES OF YOUR LOGS from your company - to PROVE DAYS OUT, as well as keeping receipts for all other allowable deductions. GET COPIES OF YOUR LOGS ON A REGULAR BASIS - and STORE THEM (cloud accounts like google drive, drop box, onedrive, etc. are good places - keep them in MORE THAN ONE PLACE). Companies usually purge their ELog records every 6 months - get copies of your logs at the end of every month.

This is especially important for states that you have to file PERSONAL INCOME TAX RETURNS for - as they seem to be even stricter than the IRS.

If you get AUDITED and you don't have the documentation to PROVE YOUR DEDUCTION - it will be DISALLOWED and you will have to pay the difference plus interest and penalties.

I haven't heard of companies putting the daily per diem on your card on a DAILY BASIS - it is still paid on your regular paycheck, along with your non-per diem pay.

Also haven't heard that they take a penny for processing - but - keep in mind, per diem is not "doing a favor for the driver", as the driver can still take the deduction and get the tax refund based on what is withheld.

But - figure 1,000 drivers, out 300 days, times $63 per day - with the company NOT HAVING TO CONTRIBUTE the 7.5% "matching funds", saves the company $1.4 MILLION in taxes they don't have to contribute to. Granted - the company writes that off as an expense - but - that puts another 1.4 Mil back in the company's pocket. WHO IS DOING WHO THE FAVOR HERE?

The difference in "net income" on a weekly check is pretty negligible.

Y'all do what you want - all I can do is provide the data. My financial situation is a little different from those where an extra $40-$60 a week on a paycheck can make a big difference. If I ever get out there (depending on how I heal from a recent surgery), I have a decent amount of $$'s in savings, so I would prefer a slightly smaller paycheck and larger refund - than an extra couple of Jacksons a week.

YMMV...

Rick

I signed up for per diem at the beginning of this year, and now it's November. There have been many on the forum who ask about per diem and what it does to their paycheck and to their income tax returns.

I am driving on a shuttle account now, the same one I drove about a year ago. Every day I drive from Memphis to a truck stop near St Louis, and swap trailers with a driver that comes in from Kansas City. Then we both got back to our original terminals. My trip is exactly the same (yawn) every day. My paychecks are pretty much the same. So I am able to compare per diem pay for a paycheck with the same trips without per diem.

This shuttle run pays $0.38 per mile. The trip is 512 miles there and back, each and every day. I found a paycheck that matches mile per mile from last year (no per diem) and from this year (with per diem).

Here are the results:

(Disclaimer: I'm not a tax professional!)

I think the per diem does not show up on your W-4 at tax time, so you don't pay income tax on it. I think (and I'll let you know in April) that since it's not on your taxable income in the first place (like your medical premiums aren't taxed) you don't need to make any 1040 deduction for it.

Also, I recently found out some people may be interested in lower taxable income for other reasons. (You know who you are!) This would be a way to lower your taxable income and not lose the money involved!

In my husband's case, the college loans get all of the money from returns. I would think the per diem is good in that case. But someone buying a house (or truck probably) would be better off getting that bigger number at the end of the year. Banks like to see that

Per Diem pay always manages to confuse us. But its not to hard to get in front of it if you break it down into its base components and maintain a simple ledger. Here is what I know:

It all starts with IRS form 2106 Employee Business Expenses. This is the form that you use to record and deduct all non-reimbursable employee expenses. These expenses include vehicle expenses (if you drive your personal vehicle for company use... not typically applicable for us as truck drivers), tools (including your load locks, kingpin locks, chains, etc.), fees and professional memberships (think HazMat endorsement, TWIC or FAST card, OOIDA membership, but also trucking industry magazine subscriptions), special purpose clothing and uniforms (that includes nearly every piece of clothing you own other than your flip-flops, tank-tops, and open-toed shoes that are prohibited by your companies dress code), laundry, and finally, food and lodging.

The last bit - food and lodging - is where the per diem part starts to kick in. But first let me share my method for recording expenses and storing/filing receipts. I keep a calendar - a day planner or day-runner - with weekly and monthly calendar pages. I use the weekly pages to record and track upcoming events - doctor's appointments, weddings, and that sort of stuff. Every time I go to the store I record the purchase on the appropriate day on the monthly calendar. I simply write the amount spent and the category (tools, food, clothing). For each day that I'm on the road for work, I make a small mark in the corner of that day to show where I was (state and, if applicable, city).

This part is important: When you calculate your expenses for lodging, meals and incidentals (M&I), you have the option of using your actual expenses (from your receipts and ledger) or the rates allowed by the IRS as published in their per diem rates (2017). The standard rate for M&I is $51 per day, but it is also higher in some states and cities, in many places as high as $74 per day. I don't know if we are able to take the deduction for lodging expenses since we have our sleeper, but if you are spending the night in a motel for any reason then you will most certainly be able to take the deduction (unless you are reimbursed for that expense).

This may seem like a lot of work, but it becomes as much second nature as does keeping your log current and in compliance. Plus, if you use the binder holding your calendar as the same binder for keeping your notes on shippers, receivers, and fuel stops, etc., then you'll be able to build a habit or recording everything with very little effort. As for how to manage all those receipts: well that's the magic of your ledger! Simply toss everyone of your receipts into a shoe box or envelope.

The IRS requires that you have receipts or a written record to account for your deductions. There is not requirement for you to maintain those receipts in any kind of order. If you present your ledger to the IRS, you have provided them with an organized, itemized, daily record of your expenses. If they really want to see the receipt, you have is stored for them, but now it is on them to sort through the box.

Your mileage may vary, but I have been audited three times by the IRS and each time I walked out with a check from them rather than writing one to them. Only once did they ask for the receipts, and when I presented my shoe box, the rummaged through it for less than a minute before accepting all of my deduction as I recorded them.

The reason that you want to jump through all these extra hoops is simply this:

If you are meticulous about recording your expenses, you could easily end the year having expenses that are in excess of the per diem pay that you received. In that event you will most certainly want to offset your per diem pay by the actual expenses that you incurred to minimize your taxes. Of course, if your expenses are less than what you received, you can simply forget about filing firm 2106 and go about your merry way.

Remember that the business of taxes is not a world of black and white: It is all about shades of gray! As long as you can justify your deductions and you record them according to the IRS procedures, you will rarely be questioned. Even President-Elect Trump will back you on this point! (And that is as far into political commentary as I will go... ;) )

I hope that helps. And of course if it doesn't, then by all means, ignore everything that I've written!

Weekly gross pay (taxable)	$921.60	$716.80
Per Diem pay (not taxable)	$0.00	$217.60
Total take-home gross	$921.60	$934.40

(Disclaimer: I'm not a tax professional!)

I think the per diem does not show up on your W-4 at tax time, so you don't pay income tax on it. I think (and I'll let you know in April) that since it's not on your taxable income in the first place (like your medical premiums aren't taxed) you don't need to make any 1040 deduction for it.

IT IS WRONG TO THINK OF PER DIEM AS TAX FREE or NOT TAXABLE- it is UN-TAXED. That means that TAXES ARE NOT TAKEN OUT FOR THE AMOUNT PAID FOR PER DIEM. So calling it "not taxable" on your table above - would be grammatically (and factually) incorrect.

Here's where you would be INCORRECT (actually - there are two things you are incorrect about).

1 - There is a BOX on the W-2 that shows this income, as well as other figures that were earned and perhaps deducted. Your PER DIEM PAY (UN TAXED INCOME) and anything else. For example - my current business pays for my health insurance - that payment ends up in box 14 - OTHER - and counts towards my GROSS (and taxable) income, until it is deducted BACK OUT on my 1040.

2 - You DO HAVE TO MAKE A 1040 DEDUCTION FOR IT. Which means you have to ITEMIZE YOUR DEDUCTIONS. This is because the per diem payments are PART OF YOUR GROSS WAGES, and have to be DEDUCTED by taking the PER DIEM DEDUCTION on your "Schedule C".

Your per diem pay doesn't just automagically get deducted on your 1040 - there's no box for per diem on the 1040A For - has to be done as an "itemized deduction" on a Schedule C.

Also - you don't need to GET PAID ON A PER DIEM BASIS TO TAKE THE DEDUCTION. You get to deduct 80% of the $63 daily rate for every FULL DAY you are OTR ($50.40 per day). You NEED TO TRACK YOUR DAYS OTR - AND BE ABLE TO PROVE THEM (logs, etc.) in case you get audited.

Say you're out for 300 days - that's 300 X $ 50.40 = $15,120 per diem deduction. This is WAY MORE than the "standard deduction" for singles of $6,300 or marrieds $12,600.

So by taking the "per diem deduction" on your Schedule C, in the above example - you reduce your TAXABLE INCOME (the final number you pay taxes on) by $8,820 MORE than if you didn't take the deduction (just took the standard deduction and didn't itemize). Even if you don't try and DEDUCT ANYTHING ELSE - you HAVE TO USE A SCHEDULE C TO TAKE THE PER DIEM DEDUCTION.

There are MANY OTHER THINGS (non-reimbursed expenses) that are TAX DEDUCTIBLE for truckers and can BE DEDUCTED IF YOU ITEMIZE (Schedule C).

Also notice that Errol is LOSING 015 CPM in "processing fees" to the company (it costs them NOTHING to pay you per diem, and SAVES THEM THOUSANDS on 7.5% they have to match on the SS/Med). I call RIPOFF. The payroll software figures this stuff out automatically - I'm not sure why they CHARGE THE DRIVER for the privilege of saving the company $$.

Also notice his TAKE HOME (last numbers in the table) is only $12.80 MORE by taking per diem.

KEY POINTS

1 - Per Diem is NOT FREE MONEY - it is GROSS INCOME that HAS NO TAXES WITHHELD UP FRONT. 2 - You MUST ITEMIZE to take the PER DIEM DEDUCTION (why wouldn't you?). 3 - You DO NOT have to TAKE PER DIEM PAY - in order to TAKE THE PER DIEM DEDUCTION.

Rick

Even after writing all that above, I managed to forget something important!

At the end of the year, or whenever you sit down to do your taxes, the process for extracting all this information and expenses is rather easy and quick.

I start by totaling up the expenses for each category for each month. I usually record these sub-totals in the margin of the calendar page for that month. Then I total up the number of days on the road while referencing the tables for per diem rates (from the link in the reply above). I only need to make adjustment if I've been in cities/states where the rate is higher than the standard rate. If I haven't, then its a simple mater of multiplying the number of days times the standard rate and then recording that amount in the margin of that month's page.

Once that bit is done for every month, I just add the sub-totals from each month to get a year-end sub-total for each category. Finally, add those sub-totals together to get my total expenses for the year.

The entire process never takes more than two or 3 hours. Granted, the one category that used to gain me the largest deduction was my vehicle expenses, but that does not mean that the remaining expenses are not significant.

We already pay more in taxes than the Walmarts, ExxonMobiles, and Donald Trumps in the world, so please make the small effort to ensure that you do not over pay your fair share! (Apparently I needed to make one more political statement. Sorry...)

Even after writing all that above, I managed to forget something important!

At the end of the year, or whenever you sit down to do your taxes, the process for extracting all this information and expenses is rather easy and quick.

I start by totaling up the expenses for each category for each month. I usually record these sub-totals in the margin of the calendar page for that month. Then I total up the number of days on the road while referencing the tables for per diem rates (from the link in the reply above). I only need to make adjustment if I've been in cities/states where the rate is higher than the standard rate. If I haven't, then its a simple mater of multiplying the number of days times the standard rate and then recording that amount in the margin of that month's page.

Once that bit is done for every month, I just add the sub-totals from each month to get a year-end sub-total for each category. Finally, add those sub-totals together to get my total expenses for the year.

The entire process never takes more than two or 3 hours. Granted, the one category that used to gain me the largest deduction was my vehicle expenses, but that does not mean that the remaining expenses are not significant.

We already pay more in taxes than the Walmarts, ExxonMobiles, and Donald Trumps in the world, so please make the small effort to ensure that you do not over pay your fair share! (Apparently I needed to make one more political statement. Sorry...)

Please KEEP POLITICS OFF THE BOARD - I get enough of it on FACEBOOK.

Also - you probably have been running your own Sub-S (as I have) or have been an employee whose employment has required travel.

CHECK WITH YOUR ACCOUNTANT - the "Transportation Industry" (ie: Truckers) has rules that are DIFFERENT FROM the "standard employee type" job - as far as deductions go.

The MEALS AND INCIDENTALS RATE FOR TRUCKING IS NOT THE SAME AS FOR NORMAL FOLK. And you cannot use the "High-Low Substantiation Method" for figuring daily rate. The DAILY RATE for our OIC is still $63 per day (80% of that - or $50.40)

When your OCCUPATION is listed as Truck Driver (OIC Code 484120) - the things and way you deduct them are significantly different than "Joe The Plumber" - PLEASE VERIFY THIS WITH YOUR ACCOUNTANT (since your status says In CDL School).

Yes - your cell phone bill, clipboard, road atlas, CB Radio, etc, etc, etc, are ALL DEDUCTIBLE EXPENSES - pretty much at 100% (or at least the portion of days that you are on the road - in the case of Monthly Recurring Expenses). But the MEALS & LODGING EXPENSE FOR TRUCKERS WORKS DIFFERENTLY.

Don't want to seem like I'm pimp slapping you here. The information you provided is EXCELLENT - for EVERY INDUSTRY THAT TRAVELS OTHER THAN THE TRANSPORTATION INDUSTRY.

If you have been DRIVING all these years - and have been doing it this way, and having successful audits - I need YOUR ACCOUNTANTS CONTACT INFO.

Rick

Rick,

Per Diem pay is not income at all. It is a reimbursement for employee expenses.

Therefore it is neither taxable nor tax-free income!

I am aware of many recipients of Per Diem pay that file non-itemized returns without penalty. However it is quite likely that they are also overpaying their taxes.

In that regard a strongly agree with your assertion that we should be itemizing our tax returns. But I will disagree with your insistence that there is a processing fee charged by Errol's employer. The difference in pay, as Errol pointed out, is due to the fact that the Per Diem pay is not income and therefor not subject to state, federal, or FICA withholding.

There is a savings for the company, but it is not because they are moving money from your pocket into their own. It comes from Workman's Compensation Insurance premiums. Your employer's premiums are based upon their average monthly gross payroll. Since your taxable pay, or gross income, is lower (in Errol's case by more than 20%), the company saves money on insurance... nothing more...

Per Diem pay is not anything new, nor is it unique to the trucking industry. And trust this old Union man, if they were improperly dipping into your paycheck, I'd be the first one out there holding a sign and walking the picket line.

Been there... Done that!

Thanks Rick,

Please recall that the reply that you quoted was a continuation of an earlier reply where I qualified my comments by writing:

I don't know if we are able to take the deduction for lodging expenses since we have our sleeper

,and,

Your mileage may vary

, and,

I hope that helps. And of course if it doesn't, then by all means, ignore everything that I've written!

.

Also note that I made the distinction between the lodging allotment and the meals & incidentals allotment. I am indeed still in training for my CDL , and I am not at all offended by your response to my comments. I believe that we are both trying to send the same message. Simply that we hope that no one here is overpaying their taxes.

I'm not aware of the distinction made for transportation workers, nor the $63 or $50.40 figures that you quoted. Can you point me to the IRS publications that are relative to us and how the figures you quote relate to the $51 listed by the IRS per diem files?

Thanks for you help.

Please don't make per diem banned like 2nd Amendment and the O/O controversies. P-D is available and important for all OTR truckers.

When I used the term "not taxed" I meant exactly that - there's no withholding on it on your check stub. If you consider it a non reimbursed employee expense, there's no tax anyway because it's a business expense of some kind. It's not income! Using per diem is an IRS blessed "ballpark" method to handle a bunch of tiny, necessary expenses.

I stated I'm not a Tax Professional, so don't rake me over the coals for not using the technical terms. But I bet you most that read the original post knew what I meant.

Finally, I hold that per diem travel expenses do come out of your taxable even before you get a paycheck. Yes, on your W-4 there's Taxable and Total income, and both get the once-over at tax time. That's what I was talking about - I'll find out what happens when I do my taxes, and not a minute sooner. Then I'll add to this thread and you still can re-fight the fight.