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February 11, 2020

No Driver Per Diem Yields Surpise Tax Bill

Billy Millis is an over-the-road company (employee) driver who lives in a high-tax state with his wife and 3 children. Billy's previous employer administered their plan through Per Diem Plus FLEETS and since his new company doesn't have a plan, he is getting an unwelcome surprise as he does his taxes. Billy spent 304 days on the road in 2019, averaged 2700 miles/week and had a banner year in earnings, however, his new employer did not offer a per diem program. Since, he understood per diem saves a driver significant taxes, Billy worried his tax refund would be much smaller than in the past and quickly assembled his records for his accountant.

His accountant called with some unwelcome surprises:

  • His exceptional earnings moved him into the 22% federal income tax bracket.
  • His total tax burden was $7,064 higher due to his employer not offering per diem.
  • The 304 days away from home were equal to $19,486 of non-taxable per diem that was considered taxable income.
  • Had his employer offered per diem his tax savings would have been about $138 per week or 5.1 cents per mile additional tax free cash.

The below table breaks down the federal and state tax consequence of Billy's employer not have a per diem program.

Fleets Are Missing A Tax Savings Opportunity

Why does Billy's employer not have a per diem program? Like many trucking companies they incorrectly assume that, since per diem is only 80% deductible, a company-sponsored per diem program will cost them money. As the table below shows the tax due on the non-deductible portion of per diem is offset by the payroll tax savings. A CASE STUDY demonstrated a trucking company saved $3,000 per driver by imlementing the Per Diem Plus FLEETS. In Billy's case the company would actually have saved over a thousand dollars in taxes or about $11,190 by offering per diem to their 10 long-haul drivers.

Billy Millis received some unpleasant surprises this tax season because his employer did not offer per diem 1) a $7,064 higher tax bill 2) $19,486 worth of per diem being treated as taxable income 3) incurred a $115 per week in additional taxes 4) the trucking company lost out on over a thousand dollars in tax savings. Fleets that adopt the Per Diem Plus FLEETS mobile platform will not only enhance driver retention and recruiting, but save many thousands of dollars in the process. 

About Per Diem Plus FLEETS

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 for iOS and Android that automatically tracks each qualifying day of travel in the USA & Canada and replaces ELD backups (logbooks) to substantiate away-from-home travel.

DOWNLOAD Per Diem Plus FLEETS Product Sheet

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.

Copyright 2020 Per Diem Plus, LLC. Per Diem Plus proprietary software is the trademark of Per Diem Plus, LLC.®

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

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