I have a new client that has a couple employees that drive his trucks (primarily Texas to Michigan). He pays them a wage and also pays them a per diem to cover their over night expenses. He has not been including the per diem into their wages. Should he be? Should the amount appear on the employees W2 anywhere?
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Truckers
You might try doing a Google search: Type in Taxation of interstate truckers.
Also, if you use CFS Tax Tools, there is a chart, worksheet, there for various types
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Not if the per diem does not exceed the federal limits.Originally posted by Unregistered
TTB, page 8-3 through 8-5 shows the various per diem limits for meals and incidental expenses, depending on the location of travel. The standard rate for lodging is also included at the top, which would only apply if the employer is paying the trucker to stay in a hotel rather than in the truck.
The per diem rates you probably want to use are found on page 8-5 under the high-low method for the transportation industry meals only. Those rates apply regardless of the location of travel.Comment
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Thanks
Thanks Bees Knees -
I think the problem we are encountering is the employer "is paying" 36 cents per mile but then reducing the gross amount by a per-diem rate of $35 a day (which is below the federal limit). He then pays the per-diem (not subject to tax) seperatly. I told him that if he wants to continue to structure the relationship as such that he needs to say his is paying something less than 36 cents per mile (i.e. maybe 28 or what ever it works out to be) AND a per diem, which is indeed what he is doing. I think under audit, he would be in trouble if the arrangement is for 36 cents but is only subjecing say 28 cents per mile to tax.
Any thoughts?Comment
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Who owns the truck? The employer or the driver?
If the employer owns the truck and is paying a per mile per diem to the employee, that would be taxable compensation. If the employee owns the truck and the employer is paying a per mile per diem, then it is tax free provided you stay below the federal standard mileage rate.Comment
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The employer owns the truck and is paying a per day per diem. I'm unclear as to why it would matter who owns the trucks. They are given a per diem to cover their meal expenses.Originally posted by Bees KneesComment
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I understand that. But you also said the driver is given a per mile per diem of 36 cents per mile. Why? If he travels 400 miles in one day, that is $144, which exceeds the federal per diem for meals. Any per diem in excess of the federal limit has to be added to the W-2 wages as taxable compensation.Originally posted by UnregisteredComment
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On second thought....
I think I miss interpreted the pay structure. Let me see if I understand you correctly.
The driver’s wage is equal to 36 cents per mile. So if he drives 400 miles in one day, his wage is $144 for that day. But then the employer reduces the wage by $35 for meals, and issues a separate per diem check for that and only includes $109 in taxable wages ($144 minus $35). The $109 shows up on the W-2 and the $35 is a tax free per diem reimbursement for meals.
You wanted to know if that was OK.
Am I interpreting things correctly?Comment
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Per Diem
Nor sure why the employer would reduce his wages. He should recieve his full pay, and a seperate check for $35.00, or a tax free per diem allowance included in his payroll check.
No 2106 that wayConfucius say:
He who sits on tack is better off.Comment
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I'm sorry I wasn't more clear. YES that is exactly how it is structured.Originally posted by Bees KneesComment
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Well there is still a potential for a Form 2106 because he is only paying $35 which is less than the Federal allowance. I think the primary reason for doing this is two fold. One it reduces the amount of employer taxes paid and most importantly it reduces the amount of workers compensation insurance. On the "flip side" many truckers do not even own a home and as a result do not itemize. This affords them the ability to receive some tax free income that they would normally not receive.Originally posted by RLymanC
As stated above, I think to avoid an audit, the employer needs to state that the employees wages are less than 36 cents per mile (what ever it "actually" works out to be) PLUS a $35 overnight per diem. This is indeed what is being done. The only down fall I see is that recruiting might be a little tricky, as the rate would be less than what they can make down the road. However, they would actually take as much or more home under this structure.
With all this being said, I just wonder how this will all under the "accountable plan" rules.Comment
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per diem
Does the employer deduct $109 and $35 on his schedule c ,or $109 and 50% of $35 one his schedule c?Comment
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Per Deim
It is Ok to deduct the per deim from the taxable income if it is an accountable plan. I know some trucking companies do that for the employees so they do not have to use the 2106. The amount should be reported on the W-2 in box 12.
However I think the amount paid to the employee is only deductable by the employer to the extent the employee could deduct. 70% last year.Comment
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per diem
So if it is an accountable, using per diem, you can do it as not taxable to employees and 70% deductable for the employer, right?
Now if it is an accountable plan and using actual exp. It is still not taxable to the employees and 70% deductable for the employer, right?Comment
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