Our tax expert responds to a common question we receive from drivers and fleets.

Substantiated provides the largest benefit to a driver. Decades before the advent of TMS software, telematics and ELD's fleets adopted cent-per-mile per diem for reimbursable employee travel expenses because it was easy to calculate and substantiate using trip sheets[i].  However, there is no correlation between the miles a driver travels and frequency of meal breaks. Under the cent-per-mile method a driver is paid only for miles driven and not nights away from home. Although, a driver may travel 500 miles one day but only 200 miles the next, the distance traveled does not affect the need to eat 3 meals a day. The IRS introduced the Special Transportation Industry substantiated per diem to simplify tax compliance for fleets by relying on days away from home instead of miles traveled. This method accurately reflects the number of meals a driver eats and resolved the problem that driver’s regularly travel away from home and stop during a single trip at localities with differing federal M&IE rates.

  • The most beneficial aspect to a driver is that substantiated method at $66/day yields on average 45% more per diem than cent-per-mile.
  • Substantiated per diem can be earned during a 34-hour restart and unforeseen delays like detention, breakdowns, or weather.
  • A typical driver will save an additional $1,100 - $1,400 in income and payroll taxes over cent-per-mile.
  • Fleets that implement the Per Diem Plus FLEETS platform will save about 37% or $800 more per driver in reduced payroll and income taxes and workers compensation than cent-per-mile.

[i] 1-274-5T(c) Rules of substantiation, Rev. Proc. 2011-47 § 4.02(5)



While, both the substantiated and cent-per-mile per diem methods are IRS-compliant, neither method has been considered a wage reclassification for 30 years. However, a motor carrier that adopts the substantiated per diem method that is built into Per Diem Plus FLEETS will realize the most benefit for both the fleet and their drivers.


This article was written by Mark W. Sullivan EA, Tax Counsel for Per Diem Plus, who has over a decade of experience advising trucking companies on per diem issues. Prior to starting a private practice in 1998, Mr. Sullivan was an Internal Revenue Officer with the New York, NY, Saint Louis, MO and Washington, D.C. offices of the Internal Revenue Service. 

Questions? Contact Mark W. Sullivan, EA.

Disclaimer: This article is for information purposes only and cannot be cited as precedence or relied upon in a tax dispute before the IRS.

Our tax expert responds to a common question we receive from fleets.

Substantiated per diem provides the largest benefit to a motor carrier over the cent-per-mile method, since the savings are directly proportional to total per diem paid to drivers.  So how did cent-per-mile per diem become so popular in the trucking industry? Decades before the advent of TMS software, telematics and ELD's fleets adopted cent-per-mile per diem for reimbursable employee travel expenses because it was easy to calculate using trip sheets.  However, there is no correlation between the miles a driver travels and meal breaks.

So why do drivers prefer substantiated special trucker per diem? They eat 3 meals a day regardless of whether they drive 200 or 600 miles. The IRS introduced the Special Transportation Industry substantiated per diem to remedy this issue and simplify tax compliance for fleets by relying on nights away from home instead of miles traveled, which is a more accurate reflection of anticipated meal expenses.

The most beneficial aspect to a motor carrier is that: 

  •  Substantiated method yields on average 37% more per diem savings than cent-per-mile or $1 for every $8 of per diem paid to driver over cent-per-mile.
  • The average fleet saves about $2,694 per driver in income and employment taxes and workers compensation.
  • A fleet employing 5 OTR drivers would save about $3,620 more with substantiated per diem than cent-per-mile.

Adding an accountable per diem program for employee drivers is a sure-fire way to enhance driver recruiting and retention. Consider the following:

  • The typical over-the-road (OTR) driver averages 127,500 miles annually and is away from home 280 nights a year.
  • A driver would receive $18,480 of tax-free per diem under the substantiated method, but only $12,750 under a cent-per-mile method.
  • Substantiated method yields on average 45% more per diem than cent-per-mile and can be earned during a 34-hour restart and unforeseen delays like detention, breakdowns, or weather.
  • The average driver will save an additional $1,126 - $1,467 in income and payroll taxes over cent-per-mile.

Both substantiated and cent-per-mile per diem must comply with the IRS substantiation by adequate records rules which state, "a motor carrier must maintain log books (ELD back-ups), trip sheets, or similar record,  to establish "time, place and location" for each per diem event". The Per Diem Plus FLEETS platform satisfies this requirement since it is maintained in such manner that each recording of an element of an expenditure is made at or near the time of the expenditure.

Document retention rules - Per Diem Plus FLEETS utilizes a 4-year retention policy, while a  fleet must retain driver log data for a minimum of 3 years from the filing date of the corporate tax return.

The transportation industry has been unique in its treatment of driver per diem for over 30 years. While, substantiated and cent-per-mile per diem methods are IRS-compliant, both require a motor carrier to comply with the adequate records and document retention rules.  However, a motor carrier that adopts the substantiated per diem method utilized by Per Diem Plus FLEETS will realize the most benefit for the fleet and their drivers.


This article was written by Mark W. Sullivan EA, Tax Counsel for Per Diem Plus, who has over a decade of experience advising trucking companies on per diem issues. Prior to starting a private practice in 1998, Mr. Sullivan was an Internal Revenue Officer with the New York, NY, Saint Louis, MO and Washington, D.C. offices of the Internal Revenue Service.  Questions? Contact Mark W. Sullivan, EA.

Disclaimer: This article is for information purposes only and cannot be cited as precedence or relied upon in a tax dispute before the IRS.

No. The treatment of per diem as a portion of an employee’s wages has been unique to the transportation industry since at least 1989 and is not considered an improper “wage reclassification”. The IRS first introduced per diem (per day) allowances in Revenue Procedure 90-60 - a simplified method of substantiating employee business expenses - in accordance with the Family Support Act of 1988.  However, the Special Transportation Industry substantiated per diem method was not introduced until 2000 [See Rev. Proc. 2000-39, 2000-9 Sec. 4.04, Notice 2000-48], which among other things:

  • Established a method allowing a payor to treat a specific amount as paid or incurred for employee meals while traveling away from home for work instead of substantiating actual costs (no receipts required).
  • Set $40 as the nationwide federal meals and incidental expenses (M&IE) rate for transportation employees subject to DOT hours of service. [Increased to $66 in 2018] [i]
  • Increased the tax-deductible percentage of employee travel expenses to 60%. [Raised to 80% in 2008] [ii]
  • Approved as a transportation industry standard prior to December 12, 1989 the treatment of a portion of a driver’s wages as per diem. [iii]
  • Required a fleet using the cent-per-mile method to include a process that;
    • tracks the amount of cents-per-mile M&IE allowance paid to a driver on a per diem basis,
    • includes a mechanism to determine when allowances exceed the amount of expenses that may be deemed substantiated, and
    • treat the excess allowance over $40 per day as wages for withholding or employment tax purposes. [Increased to $66 in 2018][iv]
  • Established that all amounts paid under a per diem arrangement that meets the requirements of business connection, substantiation, and returning amounts in excess of expenses are treated as paid under an accountable plan and are excluded from income and wages.

The Internal Revenue Code gives the IRS Commissioner discretionary authority to issue regulations, such as revenue rulings and procedures, to ease the burden on taxpayers, who would otherwise have to meet the extensive substantiation requirements in order to claim deductions for business related travel. The Commissioner updates these Revenue Procedures annually, but the relevant per diem provisions have remained substantially the same since 2000. However, in 2012 the IRS issued Revenue Ruling 2012-25, which is inapplicable to transportation industry, in response to an emerging trend whereby businesses that did not historically offer per diem were implementing abusive plans that recharacterized taxable wages as nontaxable reimbursements or allowances. In three of the four situations listed in the revenue ruling the employer failed to fulfill the business connection requirement of the regulations:

  1. A cable TV contractor offered a tool reimbursement that reduced hourly compensation that was offset with an hourly tool rate. Once a technician had received tool plan payments for the total amount of his or her tool and equipment expenses, the employer ceased paying the technician an hourly tool rate and increased the technician’s hourly compensation to the pre-tool plan hourly compensation rate.
  2. A nurse staffing contractor compensated all of the nurses on an hourly basis and the hourly compensation amount did not vary depending on whether the hospital was located away from the assigned nurse’s tax home. The employer treated a portion of the nurses’ hourly compensation as a nontaxable per diem allowance only when hospitals assignments required them to travel away from their tax home. This situation is similar to that in Beech Trucking, Inc. v. IRS (USTC 2002) where the company paid per diem to both over-the-road and short haul truck drivers who returned home nightly.
  3. A construction company’s workers were required to travel between construction sites or otherwise use their personal vehicles for business purposes. The employer paid all of its workers, including those who were not required to travel or otherwise use their personal vehicles for employer’s business, a flat amount per pay period that was treated as a nontaxable mileage reimbursement.
  4. A cleaning services company that employed cleaning professionals that provided their own cleaning supplies to perform house cleaning services. The employer properly adjusted hourly compensation and reimbursed employees only for substantiated clean supply expenses.

The employer’s cited in the Rev. Ruling 2012-25 failed to fulfill the business connection requirement of the regulations because they took liberties with IRS published guidance and ignored the limitations set forth in Rev. Proc. 2011-47 Section 3.03(2) which states in part, “An allowance that is computed on a basis similar to that used in computing an employee's wages or other compensation does not meet the business connection requirement unless, as of December 12, 1989, (a) the allowance was identified by the payor either by making a separate payment or by specifically identifying the amount of the allowance, or (b) an allowance computed on that basis was commonly used in the industry in which the employee performed services.” Furthermore, neither cable contractors, nurses, construction workers or house cleaners enjoy industry-specific rules prescribed by the IRS Commissioner like those covering the transportation industry introduced in Rev. Proc. 2000-9 Section 4.04 that established the Special Transportation Industry per diem[i].


Example 1. A truck driver employee travels away from home on business for 24 days during a calendar month. A payor pays him the $66 special trucking daily allowance for meal and incidental expenses only. The amount deemed substantiated is the total per diem allowance paid for the month or $1,584 (24 days away from home at $66 per day).

Example 2. A truck driver is paid a 10 cents-per-mile per diem allowance based on the number of miles driven. He travels away from home for 24 days but only drives for 20. Driver’s employer pays an allowance of $1,000 for the month based on 2500 miles per week. The amount deemed substantiated is the full $1,000 because that amount does not exceed $1,584 (24 days away from home at $66 per day).


Which provides the largest benefit to a driver, substantiated or cent-per-mile per diem?

Although, a driver may travel 600 miles one day but only 200 miles the next, the distance traveled does not affect the need to eat 3 meals a day. Thus, the IRS introduced the Special Transportation Industry substantiated per diem to simplify tax compliance for fleets by relying on nights away from home instead of miles traveled.

The most beneficial aspect to a driver is that:

  • Substantiated method yields on average 45% more per diem than cent-per-mile.
  • Substantiated per diem can be earned during a 34-hour restart and unforeseen delays like detention, breakdowns, or weather.
  • The average driver will save an additional $1,126 - $1,467 in income and payroll taxes over cent-per-mile.

Thirty years of IRS guidance and legislative history specifically reference an employer paying a driver in the transportation industry under the substantiated method and, therefore, contemplate that some portion of a driver’s wages will be treated as per diem. While, both the substantiated and cent-per-mile per diem methods are IRS-compliant, neither method has been considered a wage reclassification for over 30 years. However, a motor carrier that adopts the substantiated per diem method that is built into Per Diem Plus FLEETS will realize the most benefit for both the fleet and their drivers.


This article was written by Mark W. Sullivan EA, Tax Counsel for Per Diem Plus, who has over a decade of experience advising trucking companies on per diem issues. Prior to starting a private practice in 1998, Mr. Sullivan was an Internal Revenue Officer with the New York, NY, Saint Louis, MO and Washington, D.C. offices of the Internal Revenue Service.  Questions? Contact Mark W. Sullivan, EA.

Disclaimer: This article is for information purposes only and cannot be cited as precedence or relied upon in a tax dispute before the IRS.

[i] The 2019 per diem rate for travel in the USA is $66 and $49.50 for a partial day.

ii] The raised the deductible percentage of employee travel related expenses to 80% in 2008

iii] Federal Register-1989-12-12 Vol 54 Page 51038 pursuant to “Family Support Act of 1988”

[iv] Rev. Ruling 2006-56, 2006-2 CB 274

[i] Updated annually IRS Notice 2018-77, 2017-54, 2016-58, 2015-63, 2014-57, 2013-65, 2012-63, Rev. Proc. 2011-47, 2010-39, 2009-47, 2008-59, 2007-63, 2006-41, 2005-67, 2004-60, 2003-80, 2002-63 and 2001-47.

PER DIEM PROGRAM SAVES MOTOR CARRIER $3,000 PER DRIVER

"Partnering with Per Diem Plus provided us a turn-key solution configured to meet the needs of our fleet and offer this benefit to our drivers who love our new per diem app."
Nick A., Controller

ABOUT:

With over 400 power units the motor carrier is a leader among specialized companies serving the United States and Canada.

THE CHALLENGE:

The Controller was looking for a solution to two significant challenges impeding growth. The first involved reducing driver turnover and the second was raising driver pay in a tight labor market to improve driver recruiting.

REASONS:

    • The 2017 Tax Cuts and Jobs Act eliminated the ability of employee drivers to claim per diem as a tax deduction on their individual income tax return.
    • The absence of a company-sponsored per diem program increased driver turnover and hampered recruiting.
    • Creating IRS-compliant contemporaneous per diem records from ELD back ups is immensely time consuming.

WHAT CUSTOMER NEEDED:

    • An IRS-compliant mobile application platform solution that would allow for rapid deployment with minimal investment in dollars and/or IT resources.
    • An interface to manage individual and team drivers operating both ELD-exempt and non-exempt trucks that would be easy-to-use for non-technical users.
    • A scalable,  secure, cloud-based solution to meet the growing needs of their fleet.
    • Automated administration of a company-paid accountable per diem program.

THE PER DIEM PLUS SOLUTION:

The only IRS-compliant mobile application platform that automated administration of an accountable trucker per diem plan.

  • Fleet-branded Android & iOS mobile apps that individual and team drivers could use on their own device or install on fleet-owned devices.
  • Formatted per diem payroll reports streamlining the burdensome IRS tax compliance regulations.
  • Eliminated the need to retain over 100,000 pages annually of ELD / AOBRD backups for no less than IRS-required 3 years.
  • Superior driver support through our US-based Driver Success Team via Phone, Text and/or Email.
  • A “Never Lost” retention policy that insures fleet per diem data is instantly available for 4 years.

RESULTS:

  • The fleet is saving $3,000 per driver annually through reduced income and payroll taxes and workers compensation.
  • The tax-free per diem program increased Married drivers pay by 2.8 cents per mile and Single drivers pay by 4.2 cents per mile.
  • Driver turnover is down to 15%.
  • The program launched in 21 days including tech implementation and driver training.

The carrier was able to increase driver pay AND reduce expenses through implementing their per diem program with Per Diem Plus FLEETS.

Questions? Contact Mark W. Sullivan Program Manager - Per Diem Plus FLEETS

About: Per Diem Plus FLEETS is a proprietary mobile software application that was designed by truckers and built by tax pros. It is the only IRS-compliant mobile app that automatically tracks each qualifying day of travel in the USA & Canada and replaces ELD backups (logbooks) to substantiate away-from-home travel.

Our tax experts jotted down some common per diem questions that fleet customers have asked us.

“Partnering with Per Diem Plus provided us a turn-key solution configured to meet the needs of our fleet” 

Nick A., Controller

FLEETS PRODUCT SHEET

What is per diem?

The term"per diem allowance" means a payment under a reimbursement or other expense allowance arrangement that is —
(1) Paid for ordinary and necessary business expenses incurred, or that the payor reasonably anticipates will be incurred, by an employee for meal and incidental expenses, for travel away from home performing services as an employee of the employer.
(2) Paid at or below the applicable transportation industry per diem rate.

A per day travel expense allowance eliminates the need for proving actual costs for meals & incidental expenses incurred.

Under the 2017 Tax Cuts & Job Act can motor carriers still offer per diem to employee drivers? 

Yes. Drivers that receive a non-taxable per diem reimbursement from their employer (trucking company) do so under IRC Sec 62(2)(a)

Which employee drivers qualify for per diem?
A motor carrier can offer per diem only to drivers who are:

  • Subject to DOT HOS, 
  • Who travel away from home overnight where sleep or rest is required, and 
  • Do not start and end a trip at home on the same DOT HOS 14-hour work day.

Can all truck drivers receive per diem?
No. Drivers who start and end a trip at home on the same DOT HOS 14-hour work day cannot receive per diem. As of January 1, 2018 employee (company) drivers can no longer claim per diem on their Form 1040, US Income Tax Return, as an itemized deduction on Schedule A.

Is your fleet interested in adopting an IRS-compliant, accountable per diem program? Checkout FLEETS PRODUCT SHEET

What is the cost to a fleet (non-deductible portion of per diem) of a company-paid per diem plan for employee drivers? 

The nondeductible portion of per diem is approximately $0.016/mile  @ 2500 miles / week. 

Will a company-paid per diem plan raise driver pay?  

Yes. On average driver pay will increase by $0.026 - $0.039 per mile @ 2500 miles / week.

What documentation is required to prove overnight travel and expenses?
A fleet must substantiate the “time, date, and place” for each day of travel.  Here is how the IRS-friendly Per Diem Plus FLEETS web services portal output report handles this requirement:

What documentation meets the IRS substantiation requirements?
Only Per Diem Plus FLEETS platform or DOT ELD backups with an itemized log listing "time, date & place" for each per diem event. Per Diem Plus automatically records per diem for travel in the USA and Canada for solo and team drivers.

Is company-paid per diem taxable as income to an employee driver under an accountable fleet per diem plan?

No. Per diem is classified as a non-taxable reimbursement to an employee driver and is not reported under wages on Form W-2.

Would IRS argue that per diem was a "wage recharacterization"?
No. The treatment of per diem as a portion of an employee’s wages is unique to the transportation industry and is not considered a wage reclassification for the foregoing reasons.   
  • The industry has for decades classified a portion of a driver’s cent-per-mile pay as non-taxable per diem, which IRS sanctions in Rev. Proc. 2011-47 3.03(2).
  • An allowance that is computed on a basis similar to that used in computing an employee's wages or other compensation (such as the number miles traveled) does not meet the business connection requirement of IRC1.62-2(d), is not a per diem allowance, and is not paid at a flat rate or stated schedule, unless, as of December 12, 1989, an allowance computed on that basis was commonly used in the industry in which the employee performed services. See IRC 1.62-2(d)(3)(ii).

What are the current per diem rates for travel in USA & Canada?
IRS increased per diem rates effective October 1, 2018

USA $66 from $63

Canada $71 from $68

Can a fleet prorate per diem for partial days of travel?
Yes. A partial day is 75% of the per diem rate (USA $49.50 Canada $53.25).

  • Per Diem Plus will record 3/4 per diem when a driver departs their tax home AFTER noon or returns to their tax home BEFORE noon. See IRS Rev. Proc. 2011-47.6.04.

How much per diem can a fleet deduct on the corporate income tax return?
A fleet can deduct 80% of per diem on their income tax return.

What documentation is required to prove other expenses?
Paper or electronic receipts that identify what, when and the amount are required. Drivers can upload and store receipts on the Per Diem Plus FLEETS app.  Watch Run IRS Compliant Reports with Receipts video to see how easy drivers can send an itemized expense reports with receipts to payroll or accounting.

Can a fleet pay per diem for lodging?
No. There is no published guidance from IRS that allows a fleet to pay a lodging per diem.  

A self-employed driver (owner operator) falls under the related party rules of IRC 267(b) & Rev. Proc 2011-47.6.07 and, therefore, cannot use per diem substantiation that includes a meals and lodging per diem.

How long should tax records be retained?
No less than 3 years from the filing date of an income tax return.  Per Diem Plus FLEETS customers have instant access to itemized per diem tax records for four years.

What published guidance has the IRS issued that explains trucker per diem?

Refer to IRS Revenue Procedure 2011-47.  Or, use the Per Diem Plus FLEETS platform that automates administration of a company-paid per diem plan and takes the guesswork out of tax-related record keeping.  Our How it Works video demonstrates just easy the app is to use.

This article was written by Mark W. Sullivan EA, Tax Counsel for Per Diem Plus, who has over a decade of experience advising trucking companies on per diem issues. Prior to starting a private practice in 1998, Mr. Sullivan was an Internal Revenue Officer with the New York, NY, Saint Louis, MO and Washington, D.C. offices of the Internal Revenue Service.  Questions? Contact Mark W. Sullivan, EA.
Disclaimer: This article is for information purposes only and cannot be cited as precedence or relied upon in a tax dispute before the IRS.

The Per Diem Plus® Fleets mobile application platform enables fleets of any size to implement an IRS-compliant per diem plan that will:

  • Allow drivers to pocket 2.6¢ - 3.9¢ EXTRA PER MILE tax free cash
  • Offset tax reforms elimination of itemized deductions for employee drivers, like meals per diem
  • Automate administration of an accountable trucker per diem plan
  • Streamline tax compliance and eliminate the need to retain ELD backups for no less than 3 years

Per Diem Plus Small Fleets is for fleets with less than 50 drivers and Per Diem Plus Fleets is for fleets with over 50 drivers.

"Partnering with Per Diem Plus provided Reliable Carriers a turn-key solution configured to meet the needs of  our fleet and offer this benefit to our drivers” 

Nick Adamczyk, Controller
Reliable Carriers, Inc.


FLEETS is a cost-effective solution designed for motor carriers with more than 50 drivers that want to implement a mobile per diem application solution managed through Per Diem Plus web services. The white-label option allows a fleet to customize and configure the app to meet their requirements.


DOWNLOAD PRODUCT SHEET


Questions? Contact us at info@perdiemplus.com

Per Diem Plus , a proprietary software application, which provides automatic per diem and expense tracking for truckers (USPTO Registration #86754053)

Under the 2017 Tax Reform and Jobs Act company drivers who travel away from home overnight will no longer be allowed to claim on average $18,000 of unreimbursed employee business expenses on Schedule A, Itemized Deductions, which includes per diem and other job-related expenses[1]. The good news is that motor carriers can implement an IRS-compliant accountable per diem program using the Per Diem Plus® FLEETS mobile application platform to offset the lost tax deductions for their drivers, while enhancing recruiting and retention.

“Partnering with Per Diem Plus provided Reliable Carriers a turn-key solution configured to meet the needs of our fleet and offer this benefit to drivers”

Nick Adamczyk, Controller
Reliable Carriers, Inc.

 

EFFECTIVE OCTOBER 1, 2018 the trucker per diem rates were increased to $66 US and $71 Canada

PDP FLEETS PRODUCT SHEET

A fleet implementing a company-paid per diem plan can raise effective driver pay by 2.6 - 3.9 CPM at a cost of only 1.6 CPM to the fleet. All per diem paid to a driver is treated as a non-taxable reimbursement and not reported on Form W-2.

 

Single Driver

Example :

  • In 2018 the single driver earned $72,000 and incurred $16,830 of travel-related expenses he must cover using after-tax income.
  • In 2018 the single driver earns $72,000 and elects to enroll in a company-paid per diem plan at $66 / day for each night he is away from home. His payroll and income tax bill will decrease by $4,990 equal to a $0.039 pay raise.

 

Married Driver – One Earner Household & No Dependent Children

Example :

  • In 2018 the married driver earned $72,000 and incurred $16,830 of travel-related expenses he must cover using after-tax income.
  • In 2018 the married driver earns $72,000 and elects to enroll in a company-paid per diem plan at $66 / day for each night he is away from home. His payroll and income tax bill will decrease by $3,307 equal to a $0.026 pay raise.

 

 

Is your motor carrier struggling with implementing a per diem program? The Per Diem Plus Fleets mobile application platform is an easy and cost-effective solution that automates an IRS-compliant substantiated per diem plan[i] that will not only raise employee driver take-home pay, enhance recruiting and retention, but offsets the elimination of driver tax deductions for per diem and unreimbursed employee business expenses[ii]. Contact us at Info@perdiemplus.com to schedule a free demonstration.


 

 

DOWNLOAD DRIVER BROCHURE


This article was written by Mark W. Sullivan, EA, who has been providing taxpayer advocacy, consulting, and litigation services since 1998. Prior to starting a private practice, Mr. Sullivan was an Internal Revenue Officer with the New York, NY, Saint Louis, MO and Washington, D.C. offices of the Internal Revenue Service. He has over a decade of experience advising transportation industry clients with respect to per diem issues.

Please remember that everyone’s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult your own tax or accounting professional.

Copyright 2018 Per Diem Plus, LLC. Per Diem Plus proprietary software is the trademark of Per Diem Plus, LLC.®

[1] Under H.R. 1 “Tax Cuts and Job Act” OTR employee truck drivers will no longer be allowed a tax deduction for unreimbursed business expenses, which includes “meal expenses that take place during or incident to any period subject to the Department of Transportation's “hours of service” limits” and miscellaneous expenses.

[2] In accordance with IRS Revenue Procedure 2011-47 Sec 4.04 (superseded most recently by Notice 2017-54) covers meals and incidental expenses only. A driver can deduct 80% of per diem.

[3] In accordance with IRS Revenue Procedure 2011-47 Sec 4.04 (superseded most recently by Notice 2017-54) covers meals and incidental expenses only. A driver can deduct 80% of per diem.

[i] All amounts paid under the arrangement are treated as paid under an accountable plan and are excluded from income and wages.

[ii] Under H.R. 1 “Tax Cuts and Job Act” OTR employee truck drivers will no longer be allowed a tax deduction for unreimbursed business expenses, which includes “meal expenses that take place during or incident to any period subject to the Department of Transportation's “hours of service” limits” and other job-related expenses.

The ELD mandate has contributed to record freight rates that, along with tax reform, have been a boon for trucking companies. Unfortunately, due to the prospect of lower wages for employee drivers resulting from the elimination of itemized deductions, many prospective drivers are opting for a gig-economy.  As such, the driver shortage will continue to get worse unless fleets take proactive steps that mitigate the negative financial impact on drivers[i].

“Partnering with Per Diem Plus provided Reliable Carriers a turn-key solution configured to meet the needs of our fleet and offer this benefit to drivers” 
Nick Adamczyk, Controller
Reliable Carriers, Inc.

The Per Diem Plus® for FLEETS mobile platform is a cost-effective solution that enables fleets to easily implement an IRS-compliant substantiated per diem plan[ii] that will raise employee driver take-home pay and enhance recruiting and retention.   Implementing a per diem plan will offset the elimination of driver tax deductions for per diem and unreimbursed employee business expenses[iii].

A company-sponsored per diem plan can increase driver pay by 2.8ȼ - 4.3ȼ per mile, while saving the fleet over $2,600 per driver.

The IRS allows a maximum of $63 per day for travel in the USA [$68 for Canada], but a fleet can opt for a lower amount, i.e. $45 per day, so long as it is paid at a flat rate[iv].

How does a fleet convince drivers who previously itemized deductions to claim per diem and unreimbursed business expenses to participate in a company-paid per diem program? Optics are everything with drivers; show them the numbers. The average driver who is away from home 5 nights will take home an extra $70 a week or 2.8ȼ per mile.


Payroll computation: Per diem is treated as pre-tax deduction; employment and income taxes are computed and withheld; per diem is added back to payroll as a non-taxable reimbursement.

A company that offers a per diem program is required to prove

  1. Drivers were away from home overnight
  2. Identify the “date, place and amount” of each per diem event
  3. Retain substantiation through the retention of ELD backups or Per Diem Plus platform for no less than 3 years[v]

The burdensome IRS compliance requirements are one reason most trucking companies eschew company-paid per diem programs. While, ELD’s automate driver hours of service compliance, the process of creating IRS-compliant contemporaneous per diem record is immensely time consuming. Fleets that implement Per Diem Plus can run an IRS-compliant per diem reports for a week, month or even a year in under a minute. Furthermore, per diem records are retained on the PDP secure cloud and instantly accessible to a fleet for four (4) years.

BOTTOM LINE:  Fleets that offer a per diem program can increase their driver’s earning potential by thousands of dollars per year with relative ease by partnering with Per Diem Plus.
Drivers, tell your fleet managers about Per Diem Plus or download it yourself and try it free for 30 days – No Credit Card Required.
Fleets, please contact us to learn more about partnering with Per Diem Plus.  Or, download our PDP Fleets & Small Fleets Product Sheet for a high-level overview on how we can work together.
   
Download Per Diem Plus for iOS HERE
Download Per Diem Plus for Android HERE

This article was written by Mark W. Sullivan, EA, who has been providing taxpayer advocacy, consulting, and litigation services since 1998. Prior to starting a private practice, Mr. Sullivan was an Internal Revenue Officer with the New York, NY, Saint Louis, MO and Washington, D.C. offices of the Internal Revenue Service. He has over a decade of experience advising transportation industry clients with respect to per diem issues.

Please remember that everyone’s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult your own tax or accounting professional.

Copyright 2018 Per Diem Plus, LLC. Per Diem Plus proprietary software is the trademark of Per Diem Plus, LLC

[i] The average company OTR driver is away from home for 255 nights per year and will be forced to cover almost $18,000 of meals and job-related expenses with after-tax income

[ii] All amounts paid under the arrangement are treated as paid under an accountable plan and are excluded from income and wages.

[iii] Under H.R. 1 “Tax Cuts and Job Act” OTR employee truck drivers will no longer be allowed a tax deduction for unreimbursed business expenses, which includes “meal expenses that take place during or incident to any period subject to the Department of Transportation's “hours of service” limits” and other job-related expenses.

[iv] Rev. Proc. 2011-473.03. Flat rate or stated schedule

(1) In general. Except as provided in section 3.03(2) of this revenue procedure, an allowance is paid at a

flat rate or stated schedule if it is provided on a uniform and objective basis for the expenses described in

section 3.01(1) of this revenue procedure. The allowance may be paid for the number of days away from

home performing services as an employee or on any other basis that is consistently applied and in

accordance with reasonable business practice.

[v] Rev. Proc 2011-47 § 4.03: This amount is deemed substantiated for purposes of 1.274-5T(b)(2)(i) and (c), provided the employee substantiates the elements of “time, place, and business purpose of the travel” for each day or partial day in accordance with those regulations.

Schedule Fleet Demo

The passage of tax reform will rightly benefit trucking companies, but it eliminated the deductibility of per diem for employee drivers. A recent article in Freightwaves suggested “For companies that have previously considered adding a per-diem plan, but have yet to do so, now is a great time to reconsider your recruiting strategy”.[i] Unfortunately, the author overlooked three nagging issues that fleets must overcome 1) the IRS requires a fleet to substantiate the “date, place and amount” of each per diem event[ii] 2) an ELD backup for a one driver for a single week can be 20-plus pages, and 3) FMCSA allows ELD data to be discarded after 6 months, but IRS requires 3 year data retention[iii]. Per Diem Plus® resolves these issues in a cost-effective and easy-to-use, mobile platform designed for the end users; truck drivers.

Key Features:

  • IRS-Compliant
  • Available for Android & iOS
  • Uses GPS to substantiate travel in USA and Canada
  • Auto activates & ends trip tracking
  • Scan receipts and record expenses
  • Accountant-friendly itemized reports
  • 4-year Cloud-based data retention
  • Designed and managed in the USA
Fleet Options
  • Direct driver subscription
    • (Google Play & iTunes)
  • Fleets (White Label)
    • Fleet-branded Android & iOS apps
    • Configured for fleet
    • Customize geo-fence & per diem rate[iv]
    • Free install with Driver ID login
    • App management through web services portal
    • 4 year dedicated cloud storage
    • As low as $4.00/month/driver

Trucking companies stand to benefit greatly from H.R. 1 “Tax Cuts and Job Act”, but OTR employee truck drivers will not be so fortunate. As a result, the driver shortage will get worse unless fleets take proactive steps that can mitigate the negative impact on drivers. Unfortunately, Congress’s “one size fits all” approach to tax reform overlooked the most important asset to fleets: Drivers. While the media is awash with articles covering the ELD mandate and tax reform, everyone overlooked the impact on tax compliance recordkeeping obligations to substantiate trucker per diem.  Everyone but Per Diem Plus.

How does a fleet convince drivers who previously itemized deductions to claim per diem and unreimbursed business expenses to participate in a company-paid per diem program? Optics are everything with drivers: show them the numbers.

Cost to Fleet Table 2

BOTTOM LINE:  Fleets that offer a per diem program can increase their driver's earning potential by thousands of dollars per year with relative ease by partnering with Per Diem Plus.

Drivers, tell your fleet managers about Per Diem Plus or download it yourself and try it free for 30 days - No Credit Card Required.
   
Download Per Diem Plus for iOS HERE
Download Per Diem Plus for Android HERE

Per Diem Plus for Fleets:  The white label option allows a motor carrier to license our proprietary mobile application software. Need software development services? Our US-based team can design, build and manage your fleet-branded per diem mobile app for you. Contact us at info@perdiemplus.com to learn more.

This article was written by Mark W. Sullivan, EA, Tax Counsel for Per Diem Plus, LLC, who has been providing taxpayer advocacy, consulting, and litigation services since 1998. Prior to starting a private practice, Mr. Sullivan was an Internal Revenue Officer with the New York, NY, Saint Louis, MO and Washington, D.C. offices of the Internal Revenue Service. He has over a decade of experience advising transportation industry clients with respect to per diem issues. Have questions? Contact Mr. Sullivan at marks@perdiemplus.com.

Please remember that everyone’s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult your own tax or accounting professional.

Per Diem Plus®, a proprietary software application, which provides automatic per diem and expense tracking to truckers

Per Diem Plus, LLC Copyright 2018

[i]Top 3 things to know about how tax reform impacts your trucking company” Freightwaves (January 24, 2018) Troy Hogan

[ii] Treasury Regulation 1.274-5A(c)(2) governs the rules for substantiation of travel expenses. A logbook meets the requirements because it is a contemporaneous record that is created "at or near the time the expense or travel occurred" and establishes the "time, date and place" of the travel.

[iii] A Statutory Conflict - 6 month / 3-year rule

FMCSA Part 395 section 395.8(k)(1) requires motor carriers to retain all supporting documents used by the motor carrier to verify the information recorded on the driver’s record of duty status for a period of 6 months. Internal Revenue Code section 6501(a) establishes the statute of limitations for the IRS to assess taxes on a taxpayer expires three (3) years from the due date of the return or the date on which it was filed, whichever is later.

[iv] Rev. Proc. 2011-47 3.03. Flat rate or stated schedule

(1) In general. Except as provided in section 3.03(2) of this revenue procedure, an allowance is paid at a flat rate or stated schedule if it is provided on a uniform and objective basis for the expenses described in section 3.01(1) of this revenue procedure. The allowance may be paid for the number of days away from home performing services as an employee or on any other basis that is consistently applied and in accordance with reasonable business practice.

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