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].
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]. PDP Fleets & Small Fleets Product Sheet
A company-sponsored per diem plan can increase driver pay by 2.8ȼ per mile at a cost of only 1.5ȼ per mile to the fleet.
Although only 80% deductible to a fleet, per diem coupled with payroll tax savings will fund a driver pay raise for a fraction of the cost. 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
- Drivers were away from home overnight
- Identify the “date, place and amount” of each per diem event
- 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.
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.