Per diem and truck driving... any help understanding please???

Question

My mom was wondering about per diem. My dads company has decided to start paying with per diem and she has a few questions for anyone who knows.

First, as it works out he makes a certain amount a month and what they're basically saying is that they're gonna start counting a portion of that as per diem. So can a portion of your regular wages be considered per diem?

Second, at the end of the year taxes does the per diem get counted as part of gross wages?

Any help... even extra explanation would be nice... thank you! :)

Answer 1

Great question.

It is good that his company is now paying "per diem", but it is sad that they are switching some wages over to it.  Ultimately, however, your father will be better off with the new system, but only if the company uses an ACCOUNTABLE plan.  He should ask if his "per diem" will be paid under an "accountable plan".  If so, then it is pre-tax (it will NOT be part of his gross wages) and he won't pay any federal income, state income, or FICA taxes (Social Security and Medicare) on that amount.  Prior to this switch over, he had to "write-off" his own per diem when he did his tax return using form 2106 which carried to Schedule A...at least hopefully he did.  This is complicated and saves less taxes than when his company used an accountable plan to pay per diem.

If the employer is not using an accountable plan, then your father will still need to do the 2106 because all of his income will be taxed (the per diem will be part of his gross wages).

When asking his employer whether per diem is being paid on an accountable plan, if they look at your father as if he is speaking another language, have him ask whether the per diem is pre-tax or post-tax.  If they say pre-tax, then it is an accountable plan.

Answer 2

You can be sure the company isn't making this change for your dad's benefit.

It will require a lot more work on your parents' part to keep track, plus it may cost more tax.  They should consult the IRS or a good tax professional about this.

Answer 3

Read about Employee expenses (job expenses) about per diem

http://taxipay.blogspot.com/2008/05/item...

Answer 4

Okay, there's an easy way to think of per diem-it's like an expense account EXCEPT you should be paid at the end of every day or before you begin your trip.  I used to pay my guys (underground drilling) $150 per day as per diem.  That goes to pay for food and lodging and sometimes gas (depending on industry and state).  Per diem dollar amounts is something that the government regulates on a per city basis.  Hope that helps.  See website below for rates (click on your state):

http://www.gsa.gov/Portal/gsa/ep/content...