Tax Advice Questions For Company Drivers

Company's can force per diem pay?

What if I'm not entitled to a per diem deduction by having no legitimate "home" to be away from?

I think this topic Rick brought up deserves to be a thread of its own.

I'll run some numbers and go through it as an example in a new thread.

Rick S provided a great explanation of per diem pay and associated issues. This is no different than an early income tax refund that some tax preparers offer: a driver is entitled to a tax deduction at the end of the year / on their tax returns but the company is willing to give it to the driver early (every week of the year) in exchange for an "administrative fee". And on top of the "administrative fee" the company also saves (reduces the amount) paid into social security and unemployment insurance for the driver (resulting in lower Social Security or unemployment for the driver).

It truly is giving part of a drivers deduction to the company in order to receive it early.

I'm still at a loss as to how a company can force a driver to participate in this. If the driver is not entitled to the per diem deduction this can result in significant tax issues i.e. owing unpaid income taxes, penalties and fines to the IRS and / or state income tax, etc.

I'm still at a loss as to how a company can force a driver to participate in this. If the driver is not entitled to the per diem deduction this can result in significant tax issues i.e. owing unpaid income taxes, penalties and fines to the IRS and / or state income tax, etc.

Here's the thing with this.

YOU DO NOT HAVE TO TAKE the "PD Deduction" by itemizing (using a Schedule A) or doing a Form 2016.

The $$ paid as "per diem", just doesn't get declared AT ALL. (taxman please correct me if I'm wrong here). If you DO NOT ITEMIZE or take additional deductions for non-reimbursed expenses (locks, chains, CB radio, vests, etc.) - and just do a 1040(EZ) with the standard deduction on the Form 1040 - the PD pay IS ACTUALLY UNTAXABLE.

You must have a "home to go to", in order to CLAIM THE DEDUCTION on your taxes - but not necessarily have one in order for the company to PAY a portion of your wages, as "expense reimbursement".

How this is EVEN LEGAL (paying wages, as expense reimbursement), is mind boggling TO BEGIN WITH.

The other thing is that - not every day on the road (for the purposes of the daily deduction) is SPENT DRIVING. Resets, slow days, etc. - the DEDUCTION is for EVERY DAY. The PD pay is ONLY FOR MILES DRIVEN.

If this were TRULY an "expense reimbursement", it would be as a DAILY RATE (like EVERY OTHER BUSINESS DOES IT), and not based on miles driven.

The OTHER PLACE the company "makes bank", is in the 7.5% "matching funds they are saving. So in the earlier example ($10,080 paid as per diem) the company POCKETS an additional $756 per driver. For 1,000 drivers, the company saves $766,080 in taxes they SHOULD BE PAYING, if not for the "per diem pay" SCAM. And I call it a SCAM, because the more I look at it (especially with companies that pocket the "admin fee") - the more it looks like a SCAM.

So add the $766,080 to the $4,320,000 they pocket in the "admin fees", and the company puts $5,086,080 BACK in their pocket.

And per diem is NOT SUPPOSED TO BE PAY (as in deducted from your BASE SALARY), it is supposed to be IN ADDITION TO your base salary (or CPM rate). For a company to offer, say $.42 per mile as a "salary offer", then snag $.1 of that BACK in a MANDATORY PD PAY "scheme", that only marginally benefits THE DRIVER - but pays HUGE BENEFITS to the company - just REEKS in my opinion.

Make no mistake here. Per Diem is NOT FREE MONEY - nor some FREE BENEFIT. If it comes OFF YOUR BASE CPM PAY - YOU EARNED THIS $$.

The only difference would be, if, say - the company PAID YOU $.32 per mile, and that was your BASE WAGE - then they ADDED $.10cpm as expense reimbursement. Telling you that you're making $.42, then forcing you to take $.10 as PD - is very misleading.

Rick

This is an awesome thread, and very timely, as I start my career as a rookie driver (with CDL from a private school) on Monday, 5/1/17. A lot of the first three days of orientation are administrative in nature and this decision, to accept or not accept per diem , is one of the choices I have to make. It is very helpful to hear it discussed in such detail; it makes the decision an informed one based on facts and easier to choose, depending on our individual circumstances.

At the driving school I attended, all the instructors made a point of telling the students NOT to elect the per diem if it were optional and to look for another carrier if it was forced per diem. That is how strongly they felt on the matter. I am beginning to understand why! Thankfully, I have a degree in accounting and have always done my own tax returns (with TurboTax's guidance!!!) and can fully understand the implications. Hopefully this thread will help others to understand the implications.

I start with TA on Monday, and their "take" on the optional per diem is as follows, and I quote (emphasis mine), "TA has adopted the IRS Per Diem allowance amount of $63.00 per day for meals and incidental expenses. Based off of your position history and where you park for home time, TA will calculate the number of days you are away from home. The number of days will then be multiplied by the IRS Per Diem allowance amount of $63 per day to come up with your weekly Per Diem amount. This amount will then be reclassified from your weekly earnings to be treated as non-taxable. There is a reduction in mileage pay for Per Diem of .01 cpm. Per Diem will reduce the amount of taxes you pay and increase your take home pay. Per Diem is not subject to income or employment taxes. Under the Per Diem Pay Option a driver will have less record keeping responsibility for income tax purposes. TA assumes the responsibility with the IRS for the record keeping of these expenses."

By choosing per diem from the Carrier, they claim to be able to reclassify the full $63 per day IRS allowance from our mileage pay as opposed to us as individuals only being able to deduct 80% of that $63. I still don't think the numbers work out in our favor, even with that extra 20%.

I already itemize every year (rental property, small business, etc.) so another form or two doesn't matter to me! I'll keep a log (obviously!!) and receipts for special clothing, cb radio, etc. that I need to buy for my new career. All in all, I'm thinking per diem ain't such a good deal for drivers!

TA has adopted the IRS Per Diem allowance amount of $63.00 per day for meals and incidental expenses. Based off of your position history and where you park for home time, TA will calculate the number of days you are away from home. The number of days will then be multiplied by the IRS Per Diem allowance amount of $63 per day to come up with your weekly Per Diem amount. This amount will then be reclassified from your weekly earnings to be treated as non-taxable. There is a reduction in mileage pay for Per Diem of .01 cpm. Per Diem will reduce the amount of taxes you pay and increase your take home pay. Per Diem is not subject to income or employment taxes. Under the Per Diem Pay Option a driver will have less record keeping responsibility for income tax purposes. TA assumes the responsibility with the IRS for the record keeping of these expenses."

They make this EVEN MORE INTERESTING HERE.

This would be the FIRST TIME we've heard of here, where a company pays THE DAILY RATE instead of the CPM rate - though they DO TAKE .01 per mile as "administrative fees" it appears (which amounts to $6 a day on an average 600 mile day). This is ACTUALLY THE CORRECT WAY TO DO IT (from a company standpoint).

This might actually be a "better deal" than the CPM deal.

But still leaves you the issue of REDUCING YOUR W-2 WAGES even more (which comes into play for loans, etc.), and reducing the amount paid into FICA/SS/MED/FUTA.

I live in a "no personal income tax" state - so the possible ramifications of "reimbursed expenses" potentially falling into a "income category" for tax purposes is not something I could remotely comment on. Though I suspect this would also reduce your GROSS WAGES for state income tax purposes. At that point - someone would have to see if the advantage THAT CREATED, justifies taking Per Diem as part of your payment

In this case - the "Standard Daily TW Per Diem Deduction", would have ALREADY BEEN COVERED by the daily reimbursement from the company - so that is a WASH.

It STILL SAVES THE COMPANY the taxes they would have to pay on your gross wages - but doing it by the "daily rate" makes it easier on your return, to bypass the calculation of "daily rate versus CPM rate paid", as NONE of it has to be reported as income (or used to offset the deduction). And probably SAVES THEM EVEN MORE - because they pay the reimbursement, for DAYS YOU ARE NOT ROLLING (resets, wait time, etc).

Pretty slick actually. Plus it's ON THEM to do the "1/2-day calculations" correctly .

There are OTHER DECDUCTIONS you can take OTHER THAN the Per Diem (if paid a daily rate).

From OOIDA:

Q. I am a company driver. What is deductible when I’m on the road?

A. While self-employed individuals can generally deduct any expenses incurred to earn their income, company drivers are limited to non-reimbursed expenses required by their employer. You are entitled to per diem for overnights and motel expenses. A good rule to follow for deductions would be any expenses incurred that are necessary or required in the performance of your job and/or operation of the truck but are not reimbursed by your company, such as uniforms, gloves, logbooks, maps, cell phone, CB, tools, Windex, paper towels, showers, etc. Remember, as a company driver, these deductions are only available if you itemize and are not available if you take the standard deduction.

But with the Per Diem Deduction already "out of the picture", unless you have TRUCKING AND NON-TRUCKING RELATED DEDUCTIONS THAT EXCEED the "standard deduction" ($6,300 single, $12,600 married filing together, $9,300 for Head of Household), you are better of NOT ITEMIZING (obviously). If you are getting paid CPM Per Diem, and the total of that deduction plus the others EXCEEDS the standard deduction - then ITEMIZE (otherwise, don't).

Rick

I already itemize every year (rental property, small business, etc.) so another form or two doesn't matter to me! I'll keep a log (obviously!!) and receipts for special clothing, cb radio, etc. that I need to buy for my new career. All in all, I'm thinking per diem ain't such a good deal for drivers!

The sentiment here runs BOTH WAYS.

Some folks would rather see a couple of extra shekels in their check every week, and ABHOR the idea of "letting the government hold their $$ interest free".

Others (myself included) would rather see the HIGHER GROSS WAGES, greater SS/Med/FICA/FUTA payments, and get a LARGER LUMP SUM REFUND at the end of the year.

No one is "wrong" per se', either way. It's a matter of financial/tax planning.

The way I see it - NOT TAKING the PD pay, and taking the PD deduction (along with all the other legitimate DOCUMENTED deductions), will LOWER my taxable income WAY MORE than the standard deduction, getting me LESS TAXES PAID, a larger refund (don't really care about .gov holding my $$, even as much as I despise them), and raise my Gross to help my ability to obtain credit, as well as other potential benefits of having a higher gross wage.

Rick

Rick, I appreciate your thoughtful responses. I tend to agree with you on the larger gross, itemizing on long form since I have to anyway, and abhor loaning the govt. money interest free for the year.

With two kids in college, it may serve me better to show a lower income to allow for financial assistance to kick in on their college costs. I can elect the per diem option from TA, see how it works out for the remainder of this year and then run a second tax return through TurboTax as if I took it all as income, then compare to see which works better....

My brain hurts.

Steve