Federal Taxes And Per Diem 2019

Holy crap Rick.......great to see ya!!! Thanks so much for that help and I really hope your health gets stronger. You're always welcome here ya know. We're always happy to see ya.

It's always great to hear from you Rick! Thanks for speaking up on this one. Like many other things related to trucking, per diem is oftentimes misunderstood.

Ok, I thought the company per diem was a pre-tax deduction when in fact it is a company reimbursement.

Schneider National Per Diem Pay Explanation

Additional per diem considerations:

Small impact to personal time off pay (usually less than $50 annually per personal time off week) Reduced social security, unemployment and workers’ compensation benefits (estimated $10/month social security impact for every year of per diem participation) Per diem portion is not eligible for 401(k) matches, but you can fund a higher savings percentage with the extra take-home pay provided through the per diem pay plan

A lot of variables to consider when deciding to take or not take the per diem.

Ok, I thought the company per diem was a pre-tax deduction when in fact it is a company reimbursement. https://schneiderjobs.com/blog/driver/truck-driver-per-diem-pay

Additional per diem considerations: Small impact to personal time off pay (usually less than $50 annually per personal time off week) Reduced social security, unemployment and workers’ compensation benefits (estimated $10/month social security impact for every year of per diem participation) Per diem portion is not eligible for 401(k) matches, but you can fund a higher savings percentage with the extra take-home pay provided through the per diem pay plan

A lot of variables to consider when deciding to take or not take the per diem.

Keep in mind - trucking companies didn't come up with per-diem to do DRIVERS a favor. It was to do THEMSELVES a favor by saving millions in matching funds on fed tax withholdings.

Look at it this way - .13 per mile in per diem pay X 3,000 miles a week X 1,000 drivers X 52 weeks a year - the company "saves" (pockets) $1.5 MILLION in matching funds they would otherwise have to pay into taxes. Despite the "perceived benefit" of drivers having a few more $$ in their paychecks week-to-week, the companies were seeing a big time addition to their bottom lines, without lifting a finger.

Back before the changes in tax code, you could deduct 80% of the $62 daily allowance for every full day away from home.

So if you were away 330 days per year - you could take a roughly $16.3K deduction. Which, (when balanced against the old $6K standard deduction) and all the other non-reimbursed deductions that were allowed, made for a sizable bite of your AGI/taxable income. Per-diem is for meals and other expenses when working away from home. Other expenses (gloves, etc.), all added up to a good reason to itemize previously.

Keep in mind also - for most companies, per diem is NOT OPTIONAL, it is mandatory. With todays tax code - it will almost certainly lower your refund (if any), because it still counts as INCOME (even though taxes are not withheld on that amount).

To visualize this, it might be helpful if one of our members could share with us, what a years worth of per diem pay was for them last year - that way folks can better understand the impact that per-diem pay will have on their taxable income situation. With tax day almost upon us - it'll also be interesting to see if anyone got "jammed up" on their tax bill, and whether their anticipated refund was less than they expected.

Rick

it will almost certainly lower your refund (if any )

A tax refund is the most misunderstood concept to most people. A Tax Refund is just that.........A REFUND! It means you over witheld during the course of the year, and the IRS is "refunding" YOUR MONEY! It is not FREE MONEY that the Government is handing out. Lord how I wish people understood that. I would rather write a $500.00 check to the US Treasury on April 15th than get a $3000.00 check in the mail.

it will almost certainly lower your refund (if any )

A tax refund is the most misunderstood concept to most people. A Tax Refund is just that.........A REFUND! It means you over witheld during the course of the year, and the IRS is "refunding" YOUR MONEY! It is not FREE MONEY that the Government is handing out. Lord how I wish people understood that. I would rather write a $500.00 check to the US Treasury on April 15th than get a $3000.00 check in the mail.

Didn't want to get into the discussion of personal preference or ideology around taxes, withholding, etc.. The purpose of my comments, were to assess the potential ramifications of per-diem payments for drivers, under the new tax code.

It is YOUR MONEY that gets given to the government by your employer, so you don't have to write a check at tax time. If you "under-withhold", you can be subject to an additional penalty come tax-time.

Being that the standard calculations for withholding on form W-4, don't really allow for "fine tuning" your withholding - it is what it is. While many folks can afford to write a check for $500, many cannot.

Despite my disdain for our system of taxation (lived outside of it for 17 years until they caught up with me), now that I'm back in the system, I do what I can to minimize my exposure and pay as little as possible.

Rick

Despite taking my company's voluntary per diem , I get whopped hard on tax withholding. Last year I paid in over 10 grand between state and federal.. and that's WITH per diem. I owe my state about $200 and got back ~$2k federal. It works well for me. If I didn't take perdiem I'd be taxed even more and get crazy refunds (overpayment ) of $5-8k. Still trying to get it a bit closer because I don't care to give the feds an interest free loan.

Yes, the tax code has changed dramatically, October 1st, 2018. Per-diem, as far as company reimbursement, is treated as non income, thus will not be included on ones gross income. Company drivers no longer can itemize per-diem separately on their tax returns. So if you want this "tax free money or "properly termed" expense reimbursement", you must take it through your employer.

https://www.claconnect.com/resources/articles/2018/how-tax-reform-changes-and-doesnt-change-per-diems-for-truck-drivers

Since this is considered an expense reimbursement, there will be no FICA or personal taxes on the per diem. No, this expense reimbursement, is not added back to your gross income since it never was income. As far as rules for the companies and how they treat or record these reimbursements. That is on them and there is much to be concerned in how a company needs to handle it. But as far as company drivers. The per-diem is a good thing to take if you have the voluntary choice to do so.

Oo's have no changes on handling of per diem.

Keep in mind - trucking companies didn't come up with per-diem to do DRIVERS a favor. It was to do THEMSELVES a favor by saving millions in matching funds on fed tax withholdings.

Yes, definitely, before the Trump tax cut of 2017. Now it is the ONLY choice for company drivers as a "tax free" reimbursement.

Look at it this way - .13 per mile in per diem pay X 3,000 miles a week X 1,000 drivers X 52 weeks a year - the company "saves" (pockets) $1.5 MILLION in matching funds they would otherwise have to pay into taxes. Despite the "perceived benefit" of drivers having a few more $$ in their paychecks week-to-week, the companies were seeing a big time addition to their bottom lines, without lifting a finger.

Thanks to the Trump tax cut, we, company drivers, don't have a choice. How the company benefits is beside the point.

Back before the changes in tax code, you could deduct 80% of the $62 daily allowance for every full day away from home.

So if you were away 330 days per year - you could take a roughly $16.3K deduction. Which, (when balanced against the old $6K standard deduction) and all the other non-reimbursed deductions that were allowed, made for a sizable bite of your AGI/taxable income. Per-diem is for meals and other expenses when working away from home. Other expenses (gloves, etc.), all added up to a good reason to itemize previously.

This is all old news. New reality is here with 2017 Trump tax cut.

Keep in mind also - for most companies, per diem is NOT OPTIONAL, it is mandatory. With todays tax code - it will almost certainly lower your refund (if any), because it still counts as INCOME (even though taxes are not withheld on that amount).

This is completely false. Per diem reimbursement is not considered income. Please cite your source for this finding. The reason for lower refund is because new withholding percentages have changed and we're not adjusted from previous tax years before 2017 Trump tax cut.

For an outline of how the new tax law changes effect truck drivers, read this outline by a CPA. https://www.claconnect.com/resources/articles/2018/how-tax-reform-changes-and-doesnt-change-per-diems-for-truck-drivers

Despite taking my company's voluntary per diem , I get whopped hard on tax withholding. Last year I paid in over 10 grand between state and federal.. and that's WITH per diem. I owe my state about $200 and got back ~$2k federal. It works well for me. If I didn't take perdiem I'd be taxed even more and get crazy refunds (overpayment ) of $5-8k. Still trying to get it a bit closer because I don't care to give the feds an interest free loan.

You we're smart to take the voluntary per diem from your company. Yes, you lose out on the FICA, matching company FICA, but you gain on the federal and state income tax. As long as the company is not charging (or excessively) for the per diem, we company drivers would be fools not to take the per diem. The gain is much greater in tax savings than any future SS payments, especially if you we're to invest that money yourself.

Of course the company saves on not having to pay matching FICA but they only get to deduct 80% of these per diem funds for a tax expense. Note, would be 100% on wages. So it's more or less a wash for the company.

If you really wanted to lower your state and federal taxes, maximize your 401K and IRA contributions. Better, in addition, if possible, claim residency in a tax free state and eliminate state taxes.