Please Explain Per Diem

Could someone explain it as simple as possible yet detailed? Oxymoron?

I know you receive so much of a credit per day that you are gone from home at tax time. I think that is accurate. I'm not sure if this is filed on schedule A or how it works. And does it really help you get more back at tax time? Any info would be great or link to good thread that may already have been submitted

In a nutshell. The IRS exempts a certain amount of income from taxes for every 24 hour period you are away from home on business. I believe it is 80 percent of $68.00 or some such number. Lets call it $50.00 for easy math. You are away from home 300 days per year.(again, easy math). $15,000 of your income is non taxable. It is assumed that this amount will cover living expenses when away from home.

Have you checked this out yet?

Per Diem Pay For Truck Drivers

To make the per diem , the company drops your CPM by 0.10 and pays 0.085 per mile for per diem. Sounds like a rip off, and you'll see that thought if you search for per diem. However, the .085 CPM is paid tax free as a travel meals cost. Since it's already off your "real" paycheck, you do not need to file any deduction for it.

This info comes from another TT thread: Central and swift thoughts?

To clarify Errol's post, some Companies will pay you your per diem up front on your paycheck if you choose. But, you can also choose to use the standard deduction when you file your income tax return. It is a standard deduction and it is not necessary to itemize. Like Errol, I have chosen to go the Company route. Take my money every week as opposed to a big refund at tax time. Entirely your choice.

To make the per diem , the company drops your CPM by 0.10 and pays 0.085 per mile for per diem. Sounds like a rip off, and you'll see that thought if you search for per diem. However, the .085 CPM is paid tax free as a travel meals cost. Since it's already off your "real" paycheck, you do not need to file any deduction for it.

This info comes from another TT thread: Central and swift thoughts?

Correction: not all companies keep part of your per diem pay for themselves. In fact, most don't. With the majority of companies, the amount they deduct from your taxable income as per diem all goes back to the driver. You still don't need to file any special deduction on your income taxes, though. That non-taxable income is reported on a separate line on your W2 at the end of the year (either line 12 or line 14, I can't remember which).

And for the record, I still maintain (2+ years later) that it's incredibly shifty of Swift to withhold a part of their driver's pay for themselves, and I still don't see how it's legal. It's the equivalent of being told you're going to be paid $15 an hour, but when you get your pay check the stub says you're only getting $14.50 , and your employer telling you it looks better on their taxes that way. If it doesn't negatively impact other companies to pay their driver's the full per diem rate, it shouldn't negatively impact Swift either. Just my 2¢ (or 1.5¢ at Swift).

Just my 2¢ (or 1.5¢ at Swift).

Excellent!

For most folks that spend 300+ days a year out (actually even less than that) - and are filing single, the amount of per diem deduction will EXCEED THE STANDARD DEDUCTION and you will have to itemize (Schedule A) in order to get the full amount. Pretty much EVERYONE THAT IS FULL TIME OTR , will have a per diem deduction that EXCEEDS THE STANDARD DEDUCTION and you WILL HAVE TO ITEMIZE in order to take it.

You can't take the standard deduction AND take the per diem deduction on your 1040 - it's one or the other - and requires you to do a schedule A

There are plenty of other "non-reimbursed expenses" that are also deductible - and doing so can minimize your tax liability.

You can (and SHOULD) take the per diem deduction, EVEN IF YOU AREN'T BEING PAID a portion of your pay as per diem. It is a LEGITIMATE DEDUCTION.

But be sure you keep copies of your LOGS - to prove "days out". You will need these if you are ever audited.

And the pay you receive as per diem is not "off your real check". It is UNTAXED INCOME (as in, the company doesn't pay your withholding or FICA from that amount - which is why COMPANIES LIKE IT - it MINIMIZES THE $$ they have to lay out in taxes). It is STILL TAXABLE INCOME on your 1040, until you TAKE THE DEDUCTION FOR IT.

Per Diem doesn't help you get "more back at tax time" - it helps you get more net income on your paycheck (by not having taxes taken out of those amounts). The only way you "get more back at tax time", is if you aren't being paid on a per diem basis and take the deduction (which is PERFECTLY LEGAL - you are ENTITLED TO USE THE PER DIEM DEDUCTION). Unless you are a glutton and your meal expenses exceed the daily allowance - the per diem deduction ends up netting you LESS TAXABLE INCOME, than if you just straight up deducted your meals themselves as a business expense.

The current IRS rate for per diem is $63 per day (80% of that) or $50.40. Multiply that X 300 days out, and that's $15,120 you can reduce your taxable income by.

But again - to be clear: companies don't do per diem to DO THE DRIVER A FAVOR. They are doing themselves a favor by reducing the amount of matching FICA they have to pay for each employee. The DRIVER DOES THEMSELVES THE FAVOR - by taking the deduction every year (regardless of whether or not they are paid a portion of income on a per diem basis).

Rick

"And the pay you receive as per diem is not "off your real check". It is UNTAXED INCOME (as in, the company doesn't pay your withholding or FICA from that amount - which is why COMPANIES LIKE IT - it MINIMIZES THE $$ they have to lay out in taxes). It is STILL TAXABLE INCOME on your 1040, until you TAKE THE DEDUCTION FOR IT."

Am I correct that this could affect any future social security, unemloyment, and disability payments as well?

Am I correct that this could affect any future social security, unemloyment, and disability payments as well?

From out TT Wiki:

Per Diem Pay For Truck Drivers

"It reduces gross income for the driver, potentially affecting other aspects of his/her life, such as loans based on income/ability to repay, etc. Banks tend to examine gross-income numbers as part of the loan/credit process. That goes for anything that is based on a driver's taxable income, really, like unemployment insurance, workers comp., etc."