Tax Advice Questions For Company Drivers

What are the things that American truck drivers for companies can write-off for filing their taxes each year?

1. truck stop meal costs? 2. work clothing? 3. shower fees? 4. lodging? 5. laptops, smartphones used on the job? 6. dogs, security animals used on the jobs? 7. other?

For example, if I were to pay $10 for breakfast at a truck stop, would I be able to write off 100% of that cost or just a smaller percentage?

Is it still cheaper in the long run for drivers to prepare their own meals on the road because restaurant write-offs don't "pay off that much" on the IRS returns?

I know you must keep all those receipts for your CPA in a safe place.

I know you must keep all those receipts for your CPA in a safe place.

Personally I always took the standard deduction for meals, which is way more than I ever actually spent out there, which means no CPA, no receipts, no itemization for meals and such.

Now if you buy a bunch of stuff for work like a GPS, clothing, tools, and the like you can itemize and write those off.

About an hour on TurboTax and you're done. As a company driver there's really not much to it when it comes to taxes.

Personally I always took the standard deduction for meals, which is way more than I ever actually spent out there, which means no CPA, no receipts, no itemization for meals and such.

^ This.

Of course, always remember that tax free reimbursements have to be subtracted from employee expenses before you deduct them.

Per Diem allowance is $63 per day, IIRC, for meals and incidentals for 48 state OTR drivers. One might think showers are included in the 'incidentals' that are already included in the $63 daily rate, but IIRC in recent years incidentals have only included tips and fees paid to service workers like porters and waiters, so I'd claim the showers as travel expenses over and above the $63. It's an 80% deduction, but that beats the 50% deductibility of meals for 'normal' people.

Lodging is actual cost, within reason, or you can take the Per Diem allowance for lodging. (I'd have to look that up)

If you're a W2 employee, all of your unreimbursed work expenses, including work boots, license fees, union dues, the percentage of work use for cell phones (for example, if your cell phone bill is $50 a month and you use it 50% for work and 50% for personal, you deduct $300) are what we call 2% miscellaneous deductions. Claiming your dog/dog food/veterinary costs for security would be pushing the envelope harder than I'd be willing to do on a return that I sign. Work clothes are another area where many taxpayers want to go farther than the rules really allow. If you could wear them in your daily activities, even if you don't, they're just clothes. Company logos go a long way towards making them 'work clothes'. For example, my suits/ties/wingtip shoes are not 'work clothes', even though I never wear them anywhere else, I could wear them to church/restaurants/whatever if I wanted to.

You put unreimbursed employee expenses on form 2106, and they flow through to schedule A, where 2% of Adjusted Gross Income is subtracted and the remainder is an itemized deduction.

You're generally better off taking a tax free reimbursement from your employer, even if they reduce your taxable wages by a corresponding amount, than you are taking the 2% deduction, especially if you don't have mortgage/property tax and would not be itemizing deductions if not for your trucking expenses.

For example, let's say you make 60k a year and spend 254 days away from home. Your M&I deduction is 80% of 16,002, or 12,802, but you have to reduce it by 2% of income, so you only deduct 11,602. (this is a simplification, where M&I are your only unreimbursed employee expense, in real life you would also have steel toe boots, tire chains, padlocks, cell phone...)

Taxman wrote:

Company logos go a long way towards making them 'work clothes'.

There are certain types of clothing that at least for me, is required; high quality reflective vest, safety yellow ANSI shirt (with reflective bands), and ANSI II rain/winter jacket. I don't buy cheap stuff, so it lasts but if not for the job I wouldn't own any of those items.

I own a suit..., I doubt however at the present time, you own any of the other items I mentioned. No need. A bit of a nit, but I typically replace all of my "Lime-on" shirts after 24 months. Vest is due, so is the jacket.

Wolverine...really good stuff by the way. Swear by it.

There are certain types of clothing that at least for me, is required; high quality reflective vest, safety yellow ANSI shirt (with reflective bands), and ANSI II rain/winter jacket. I don't buy cheap stuff, so it lasts but if not for the job I wouldn't own any of those items.

I wouldn't hesitate to claim all those as employee expense items. In fact, I think I did write off that vest and/or shirt for a client last month.

But the only dog I ever recall writing off lived at the storage yard and did not go home with its owner.

Standard disclaimer, this is not professional advice, I am not your tax accountant...

There are certain types of clothing that at least for me, is required; high quality reflective vest, safety yellow ANSI shirt (with reflective bands), and ANSI II rain/winter jacket. I don't buy cheap stuff, so it lasts but if not for the job I wouldn't own any of those items.

I wouldn't hesitate to claim all those as employee expense items. In fact, I think I did write off that vest and/or shirt for a client last month.

But the only dog I ever recall writing off lived at the storage yard and did not go home with its owner.

Standard disclaimer, this is not professional advice, I am not your tax accountant...

I never have hesitated to claim 100% of that sort of thing. The conformation is helpful for all of our readers. Thank you.

Which brings up these questions.

Some companies pay a portion of CPM pay, as "per diem" (typically forced).

It is (supposedly) paid as "reimbursed expense" for "meals & incidentals" - which is weird, because it is actually a portion of your SALARY (not reimbursement, per se'). For those companies where per diem pay is "optional" - the CPM pay rate is the same to start (and those that take the per diem option, get the same base minus the per diem).

How does this reflect against the "standard transportation per diem deduction" the IRS allows (80% of $63 per day - or $50.40).

Typical per diem is $ .10 per mile (and some companies take .02 or .03 as "administrative fees").

Going on an (average) of 3,000 miles per week, this would be $300 in per diem (or $210 net if they take .03 admin fees).

Take that times 48 weeks (assuming 4 weeks total of home time in a year) - and you have $10,080 paid as per diem (at .08 cpm). 48 weeks (336 days) of "standard transportation per diem deduction", comes out to a $16,934 deduction ($50.40 X 336). And I'm rounding here, just to make the numbers easier.

1 - does per diem pay (even though the company classifies it as reimbursement) have to be declared as income (to be deducted later)? Members here have said it doesn't show up on their W-2's - how/where DOES IT show up (or is it supposed to show up?).

2 - can you take the FULL PER DIEM DEDUCTION (in this case, $16,934) or only THE DIFFERENCE between what was already paid as "reimbursed expense" (portion of cpm pay $ 10,080) or $6,854?

3- Can the "administrative charge" be added to/deducted also?

I find it "kinda shady", that a company can claim a portion of "salary", as reimbursed expenses. It must be "somewhat legal", because the IRS hasn't stopped the practice (and no one HAS SUED).

When I was at a temporary duty station in the military, I got a daily per diem, IN ADDITION TO my base pay - because I wasn't "on base" or on my ship (where meals were included).

Rick

Take that times 48 weeks (assuming 4 weeks total of home time in a year) - and you have $10,080 paid as per diem (at .08 cpm). 48 weeks (336 days) of "standard transportation per diem deduction", comes out to a $16,934 deduction ($50.40 X 336). And I'm rounding here, just to make the numbers easier.

1 - does per diem pay (even though the company classifies it as reimbursement) have to be declared as income (to be deducted later)? Members here have said it doesn't show up on their W-2's - how/where DOES IT show up (or is it supposed to show up?).

2 - can you take the FULL PER DIEM DEDUCTION (in this case, $16,934) or only THE DIFFERENCE between what was already paid as "reimbursed expense" (portion of cpm pay $ 10,080) or $6,854?

3- Can the "administrative charge" be added to/deducted also?

I find it "kinda shady", that a company can claim a portion of "salary", as reimbursed expenses. It must be "somewhat legal", because the IRS hasn't stopped the practice (and no one HAS SUED).

Rick

1: The Per Diem doesn't get reported in Box 1 wages on your W2, which is good, except when you're proving income on a loan application. It also doesn't get reported in Box 3 wages, which is good and bad, you and your employer save on Old Age and Disability Insurance taxes (6.2% of wages for you, 6.2% for your employer, but OTOH reducing your taxable earned income reduces your future Social Security benefits. It should be reported on line 12, code L, Substantiated Employee Business Expense Reimbursement (nontaxable).

2: The reimbursement gets deducted from your expenses, and the 80% factors in at the end:

Business Meals Expense = 336*63=21,168 (Form 2106, Line 5, column B)

Reimbursed by employer = 10,080 (Form 2106, Line 7B)

Unreimbursed employee business expense = line5-line7 = 11,088 (2106, Line 8B)

80% = 8,870 (2106, line 9B) (flows to Schedule A, line 21)

3: That's going to depend on if it's reported on your W2, and where. If it's not a reduction for Box 1 wages, it's probably an unreimbursed expense on Form 2106. If it reduces Box 1 wages, it came out pre-tax and there's nothing left to deduct.

I don't have a professional opinion on whether it's proper, but I wouldn't like it if I were the one paying it. Others here can tell you if it's standard in the industry. I know Lease-Operators who pay 2% for use of their carrier's corporate credit card. That seems crazy to me, I'd be glad to pay THEM 1% if they put all their fuel and meals on MY company cards.

https://www.irs.gov/pub/irs-pdf/f2106.pdf

Which brings up these questions.

I find it "kinda shady", that a company can claim a portion of "salary", as reimbursed expenses. It must be "somewhat legal", because the IRS hasn't stopped the practice (and no one HAS SUED).

In effect, they're reclassifying part of your pay as reimbursement of accountable expenses. If I were running their payroll, I'd want the employee contracts to read something like "Pay will be $0.30 per mile, plus per diem allowance of $0.10 per mile". Then it's right up front, they're only paying you wages of 30 cents per mile. The good news is it's coming to you 100% tax free, instead of you including it in taxable income and only getting to deduct 80% of it.

(edit to my last message) I just noticed that it looks like the 2 cent fee is coming out of your per diem, not your wages. Is box 12, code L on your W-2 $0.08 per mile or $0.10 per mile?

In effect, they're reclassifying part of your pay as reimbursement of accountable expenses. If I were running their payroll, I'd want the employee contracts to read something like "Pay will be $0.30 per mile, plus per diem allowance of $0.10 per mile". Then it's right up front, they're only paying you wages of 30 cents per mile. The good news is it's coming to you 100% tax free, instead of you including it in taxable income and only getting to deduct 80% of it.

(edit to my last message) I just noticed that it looks like the 2 cent fee is coming out of your per diem, not your wages. Is box 12, code L on your W-2 $0.08 per mile or $0.10 per mile?

I'm currently in IT - but I'm like, the resident "rules & regs" guy (some folks call me Rickipedia).

At any rate - for the people here whose companies do "forced per diem pay" - the admin expense comes out of their actual mileage pay. So if their stated pay is $.42, and their per diem is $.10, they will be getting paid $.32 as their "W-2 Wages", while only netting $.08 as "per diem pay" - with $.02 (or $.03) being retained by the company as "admin charges" for (cough cough) "administering" the PDpay. Since this is "coming out" of your wages, and not being paid to you as "reimbursed expenses", the company is retaining part of your wages as "admin fees". I'm going to say, if they are taking an admin fee - Box 12/Code L would reflect the amount PAID TO the driver, as the driver is NOT RECEIVING the actual $$ reimbursement.

This is a TOTAL RIPOFF on the companies part, as the PD calculation is done in their PAYROLL SOFTWARE automatically. There's no reason to retain this on the company side, as it doesn't create any additional work on their part, except maybe checking a box in their payroll software.

We "debate" the merits of PD pay here frequently. My position has always been that it BENEFITS THE COMPANY way more than the driver, in the way of reducing the company tax liability on gross wages with regards to the 7.5% share of FUTA they must contribute, as well as FUTA and any state unemployment liabilities. As well as retaining part of your wages as "admin fees".

The DRIVER can reduce their tax liability EITHER WAY, by simply taking the deduction on Schedule A (if they aren't being paid in PD) or on a 2106 (if they have to calculate unreimbursed versus reimbursed expenses because they chose/were forced to take PD).

And the driver SHOULD TAKE THE TIME to do the 2106 - to recover the ADDITIONAL DEDUCTION(s) over and above what their "advance reimbursement" already covers (as non-taxable income). And if they're NOT getting paid PD "in advance" - they should take the time to at least do a Schedule A and see if it benefits them by reducing their "taxable income", and netting them a BIGGER REFUND.

The driver benefits MORE by not taking the PD pay - in the way of higher gross wages and contributions to SS/Med - and still gets to deduct the 80% ($50.40) in M&I. For a full year of driving, this more than exceeds the "standard deduction" of not itemizing (even filing married), before you even calculate the rest of deductible/unreimbursed expenses.

The only "supposed benefit" of of per diem pay, is that the amount paid "in advance" by the company, is at 100% "un/non-taxable", whereas the difference in the "standard per diem deduction" is only 80% un/non-taxable - when you actually take the time to do the Schedule A (for no advance PD) or the 2106 (for advance PD payments from the company).

The only amount you could "theoretically use", is the amount you are ACTUALLY REIMBURSED by the company - and you cannot "recover" the (cough cough) "admin fees" - which, in the example above of: (3,000 miles per week X 48 weeks) X $.03 admin fee = $4,320 that THE COMPANY is "stealing" from your income, that you cannot "recover" on your taxes - because it ACTUALLY WAS NOT PAID TO YOU AS REIMBURSED EXPENSE.

That's MESSED UP. I can't believe, with all the other lawsuits the companies have been hit with regarding employee classification, wages & compensation - that NO ONE HAS SUED FOR THIS. For a company with 1,000 drivers they are RIPPING their employees and pocketing $4,320,000 (that they are likely "writing off" as a business expense themselves).

WOW!

Rick