Question about pay and per diem?

If the company pays part of your wages as "per diem", it is re-classified as a reimbursment instead of wages. Reimbursements are not subject to income taxes and Fica. So you save 7.5% plus your tax rate (federal plus state and local). So, if you drive 100,000 miles a year, and they pay 11c per diem, you reduce your taxable income by 100,000 * 0.11, and you taxes by (100,000*0.11* (7.5% (Fica)+ 20% (federal) + 8% (state and local)), or a total of $3,905 per year.

Because your taxable income is reduced, your social security benefits and your ability to borrow money will be reduced. Of course, you will have MONEY, so you won't need social security, or loans.

 

You might not think SS Benefits are not important now while you are working, I had four sheets of paper handed to me that essentially showed my life down to the penny. That was 16 years ago. It was then time to decide really carefully how it worked out.

They asked me did I get paid per diem? Flat no. I took care of my own Perdiem at a flat daily rate allowed by the IRS every year in my own taxes. I did not allow companies to pay me per diem. So in 2001, I and wife were away more than 125 miles from our home working in a big rig for a total of 306 service days on logs on duty and driving etc out of 365 days of 2001.

The flatrate of Perdiem for us came to right about 13700 something odd dollars to apply against whatever taxes. (There were none that year, I'll explain for a gross income of 67000 filing jointly.)

What we had done was each of us paid 100 dollars to Uncle Sam weekly payroll over and beyond W2 standard withholding and another 75 each to Arkansas every payroll. The result was a 5 figure check return that forms the foundation savings against the 2002 year that is here and now. By the time we are supposed to finish the entire year next in trucking that figure of savings should be at least doubled if not tripled after expenses. (Food etc) And we repeat the tax filing end of jan and add another 5 figure check to that.

It is my understanding last year they got all that stopped in Perdiem. I would not care if the company wants to add 11 cents on top of 42 or whatever an pay me 53 a mile. It's silly I was making in the high 40's 20 years ago, why in the world must I scratch and hiss to make a piddling .52 pray tell? I am a top driver and should be paid 0.80 or something. Truck is getting anywhere from 1.99 through 3.00 a mile. Sure they can break off 0.80 And stop it with the low miles game.

 

My understanding is that your no longer allowed to subtract expenses as a W2 company employee. If so, then it would be wise to either take the per diem by the employer or become self employed and use schedule C.
I wouldn't rely on Social Security in the future.

 

This is more or less common practice in the industry today. The per diem rate paid will vary from carrier to carrier

For the carrier, this offers enormous upside and no downside. For the employee, it has both upsides and downsides to be weighed. Basically good thing in the short term and potentially damaging in the long term. But also, OTJ injury workers comp wage claims and other benefits that might be paid based on average wages [due to accident, injury, or long term illness] will be reduced due to per diem

 

Tax laws are different, consult a tax advisor before deciding, Never before have I allowed a company to pay me part of my wages as per diem, However under the current tax laws my taxman advises me to take the 53.00 dollars per day as per diem that the company is offering to do. Has to do with not being able to deduct expenses any longer.

 

When I used to be an adjuster, per diem wasn't commonly paid, and I did handle trucking claims, including a large mail carrier in California, a large car hauler and a mega based in Des Moines with red trucks. I calculated the average weekly wage based on the gross the employer gave me. If i were an injured worker, I think that I would successfully argue that that should be part of my wages for disability.

 

I would argue that too, but push come to shove, I suspect the driver is going to lose that battle in many cases. It might also depend on the employee or employer domicile state?

 

Knowing the workers' comp system, that is one I'm certain the worker would win. There certainly is the argument the other way, but wc court system is set up to benefit the worker. If a driver would claim that the employer received the tax benefit by paying him this way as opposed to letting the driver take the deduction on his return, as has been done in the past, then it should be added to average weekly wage, just as taxes are and payroll deductions.

As I said, there is a compelling argument not to, but I think that an applicant attorney would have an easy time prevailing.