What Is The Difference In Per Diem And Straight Pay Truck Drivers?

I am looking to change companies and the one I am looking to go to has two types of pay: per diem and straight: can anyone help define the difference?

I think you could hash and re-hash the positives and negatives of truckers and per-diem pay for weeks on end, but as far as I'm concerned it keeps the money you've earned in your pocket instead of having the government hold it for you until they decide if it really belongs to you or not. I was an employer for thirty years before I started this truck driving career, and I can tell you that I paid a fortune in payroll taxes over those years. To be fair, most of it wasn't even my money, it was money my employees had earned that was deducted from their pay, but even for a small business like mine the dollar amount added up to be an astronomical amount each year. If you can get it now and not have to wonder if you are going to get it later or not, I say take it now.

The benefit to these trucking companies when paying per diem is that they have less dollars to pay for their portion on matching the social security taxes. When you have a couple of thousand or more employees out there driving and getting a good paycheck each week this amounts to a tremendous savings in tax dollars spent by the company.

So, again, I ask why would it ever be smart to take per-diem if the company charges a fee to do it? Why not just increase your exemptions?

What am I missing?

There are a lot of people who can't save a dime if it hits their hands or their bank account. Every penny that comes in goes out. So paying more in taxes and using your tax refund like a savings account is an excellent idea compared to not saving money at all. And I know - the financial people say, "Don't give the government a tax-free loan. Take the money and invest it during the year." Well that's baloney in the end. I mean, do the math. How much interest are you making on such a tiny amount of money each week? In the end - next to nothing. Now if you were talking about millions of dollars every year that would be a much different story. But if using the tax refund system as a savings account works well for you then by all means do it! It may not win an award for the most perfectly engineered plan on Earth but it will be very effective. You can't spend money the government is holding for you.

It is my understanding that if you drive a company truck and are considered a company employee, then any per diem claimed at tax time would have to calculated on your Schedule A as itemized expenses. The standard deduction for married couples in 2015 is $12,600. I don't have mortage interest so I am thinking that my per diem expenses would not exceed the regular standard deduction so I would certainly be better off having the company pay me per diem.

Am I reading this right?

Thanks all!

Daved - There are other employee expenses you can deduct, that have not been employer reimbursed), such as tools, paper towels, parts, etc. Also as previously mentioned truck drivers are allotted 80% of the government per-diem rate (which is currently $59). What I noticed is that the companies that do offer the per-diem option, do not offer the full 80% (one company offers $44) so the driver can deduct an additional $3.20 when they itemize their taxes. If a driver is out 100, 200 or 300 days in a year that is $320, $640, $960 additional dollars back in your pocket. So I ask, why would you not want to itemize and receive all the credits and deductions you can. If the driver itemizes for full per-diem for the year that's $14,160 for 300 days on the road.

I currently work for a company (non-transportation), and they give me 75% of per-diem rate and end of year I itemize the remaining 25%. Highly recommend consult a tax-advisor that specialize in trucking taxes.

R/Scott

Per diem is just Latin for "per day." It is pay that the company will give you and it will NOT be taxed.

So say you are paid $1.00/cpm. (Using this high a figure just for math simplicity) The company says that $0.20/cpm is per diem and $0.80/cpm is not. That means that tax will be taken out of only the $0.80/cpm, so if your mileage that week is 1000 miles, you will have taxes taken out from only $800. The other $200 is tax free.

The point of per diem is to help put more money in your pocket each paycheck. If you use per diem you usually cannot deduct road expenses when you file your taxes at the end of the year because the point of per diem is to help you pay for food/toothpaste/etc/etc with tax free money.

Per diem may be good for one driver and not good for another. It depends on the person's specific tax situation, does the person have a mortgage? Rental property? Any other income? All sorts of stuff. So it is best to speak with a tax professional at least once to get a good grasp of whether per diem is useful to you or not.

To Thinks too much, thanks, you have defined your answer very well and I now understand how it works.

If you use per diem you usually cannot deduct road expenses when you file your taxes at the end of the year because the point of per diem is to help you pay for food/toothpaste/etc/etc with tax free money.

It's not that you can't deduct expenses if you get paid per diem. It just means that part of your salary is given to you tax-free. Therefore, at the end of the year when you file your taxes you won't get a huge return back because you didn't pay as much in during the year. You'll still deduct your expenses though.

And most people take the standard deduction for meals because in the end it works out better that trying to itemize most of the time.

I am currently trying to run the numbers on the per diem through my company. I went solo about a month ago and was automatically put on per diem.

Advantages to per diem are you get the tax savings up front so your checks are larger. My company sends a message on the quailcom when pay is figured and actually tells me how much more I get for the week because of the per diem. It also makes it easier as far as record keeping. I was advised to print out and keep my e-logs if I decide to not take per diem up front. The logs would be used to justify my claim for per diem on my taxes at the end of the year. And to keep them in case I was ever audited.

The down side could be that I actually lose money and is what I am trying to figure out. If you do not take the up front per diem pay then you claim it at the end of the year on your taxes. I believe it is $58 per day you are on the road that you can claim, and 80% of that figure is not taxed. So that is your tax credit.

So what I am trying to figure out is how many miles I have to average on daily per diem pay to make sure I am getting the same credit as the $58 per day figure.

Now here is the catch and something you need to ask your prospective employer. How much of the per diem pay do they keep? Most companies keep a portion of the per diem for running the program. When I asked about it I was told that they pay a fee to the government for doing per diem and that's why they keep it. But I would be surprised if the companies do not actually profit by paying per diem.

As an example my company deducts 2 CPM. So basically from my normal CPM pay 13 cents is deducted to be paid per diem. But of that .13 I actually only receive 11 CPM. This is why I think I may actually receive a higher credit if I wait till the end of the year to claim my per diem. Then I claim the entire allowable amount and am not paying someone else to get it up front.

I will be talking to my accountant soon, and hope he can shed some light. But if he does not know per diem inside and out I will need to seek advice elsewhere. I think it really comes down to how many miles per day your getting and if you can afford to wait to take the claim at the end of the year. Which is kind of a catch 22. Someone getting lower miles would probably really need the money up front, but in the big picture would be receiving less credit on a yearly basis.

Would love to hear from someone who truly understands the ins and outs of per diem.

Woody

Woody, you pretty much nailed it. The companies take a small fee - 2 cents per mile in your case - to offer per diem. I don't know the entire story myself about how much of that the company keeps as profit and how much they're paying out as a fee to the government. But a lot of companies require per diem and nobody in business requires anything unless it benefits them somehow. So I'm guessing the companies make a tiny bit themselves from their per diem program. At least some of them do.

In the end with per diem you'll:

- Get more money in each paycheck

- Pay less in taxes each week

- Pay a small fee to your company for the privilege of getting per diem pay

- Get a smaller refund, if any at all, when you do your year-end taxes

Nobody in business requires anything unless it benefits them somehow

Brett .... that being said is there any wonder why companies 'offer' it , why some companies try to 'force' it and why drivers can't see through it ? I have not done enough research to find out the federal rules but I read somewhere that an employee cannot be forced to take it but I imagine like anything else in trucking denying a companies right to their piece of the pie so to speak may look less than favorably for the driver .

Nobody in business requires anything unless it benefits them somehow

Brett .... that being said is there any wonder why companies 'offer' it , why some companies try to 'force' it and why drivers can't see through it ? I have not done enough research to find out the federal rules but I read somewhere that an employee cannot be forced to take it but I imagine like anything else in trucking denying a companies right to their piece of the pie so to speak may look less than favorably for the driver .

It looks like just a math thing, I have never used my tax refund for a savings account and like being taxed less upfront, even if it means less of a refund at tax time. I can manage my expenses while on the road. Thanks for all the help, I am beginning to see this forum is very worthwhile.

Nobody in business requires anything unless it benefits them somehow

Brett .... that being said is there any wonder why companies 'offer' it , why some companies try to 'force' it and why drivers can't see through it ? I have not done enough research to find out the federal rules but I read somewhere that an employee cannot be forced to take it but I imagine like anything else in trucking denying a companies right to their piece of the pie so to speak may look less than favorably for the driver .

I highly highly doubt a company would look at a driver differently if they choose not to go with per diem. But there is definitely a benefit to the company, or they would not spend so much effort explaining to drivers that it benefits the driver. Really it comes down to do you want/need more money on each paycheck... or can you manage with smaller paychecks and then get a bigger tax refund.

It seems that per diem is offered for similar reasons as driver advances. Quite a few drivers need/want the money ASAP, either they have a lot of expenses, they are poor at managing their money, they have CDL school tuition to pay, whatever the reason. So per diem helps the company get drivers and helps drivers get their money.

Personally I would not work for a company that "forces" per diem. The more choices I have the better.

I think you could hash and re-hash the positives and negatives of truckers and per-diem pay for weeks on end, but as far as I'm concerned it keeps the money you've earned in your pocket instead of having the government hold it for you until they decide if it really belongs to you or not. I was an employer for thirty years before I started this truck driving career, and I can tell you that I paid a fortune in payroll taxes over those years. To be fair, most of it wasn't even my money, it was money my employees had earned that was deducted from their pay, but even for a small business like mine the dollar amount added up to be an astronomical amount each year. If you can get it now and not have to wonder if you are going to get it later or not, I say take it now.

The benefit to these trucking companies when paying per diem is that they have less dollars to pay for their portion on matching the social security taxes. When you have a couple of thousand or more employees out there driving and getting a good paycheck each week this amounts to a tremendous savings in tax dollars spent by the company.