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The freight market has experienced steady softening over the past year while diesel prices have gained more than 40 cents from a month ago. So how can fleets mitigate softening freight rates and the exploding cost of fuel? Most fleets aren’t maximizing the tax deductible benefits of per diem, leaving thousands of dollars per driver on the table every year. Below is a guide on how best to manage this within your carrier operation, and unlock significant fleet savings while boosting driver pay amid economic uncertainty and record inflation.
Although Congress temporarily increased the trucker per diem deduction to 100% for 2021 and 2022, there is a common misconception in the industry that at 80% deductibility, per diem will not save a motor carrier money. The below tables prove otherwise.
Assumptions
The following analysis assumes:
Twenty-three states are members of the National Council on Compensation Insurance (NCCI), and 39 rely on NCCI regulations. Under NCCI rules, a motor carrier paying substantiated per diem under an IRS-accountable plan can exclude up to $69/day of per diem from taxable wages, which provides a significant per driver annual savings to a fleet. (IRS Publishes 2024 Trucker Per Diem Rates)
Even with growing economic uncertainty and recessionary clouds on the horizon, Congress elected not to extend the 100% deduction for per diem. However, a motor carrier that implements an automated per diem solution will be in a stronger position to weather the economic storm.
As of January 1, 2018, employee drivers can no longer claim per diem as an itemized deduction on their federal income tax return. However, motor carriers can offer per diem to employee drivers to recapture the lost tax savings. The average Married over-the-road driver earning $65,000 annually will save approximately $3,457 in federal income taxes equivalent to $0.03 cents per mile.
The average Single over-the-road driver earning $65,000 annually will save approximately $4,485 in federal income taxes equivalent to $0.04 cents per mile.
In short, you are virtually always better off leveraging a fixed $69/day (as of this writing) to maximize your per diem tax offset from wages.
Per Diem Plus Fleets is also available on the Truckstop Marketplace, Samsara App Marketplace and Platform Science Marketplace
Per Diem Plus is the leading provider of cloud-based, IRS-compliant trucker per diem software solutions in the transportation industry. Established in 2015, Per Diem Plus was born over the founders 30 years of experience as IRS agents and tax practitioners and a relentless pursuit to introduce efficiency to the time-consuming task of per diem tax compliance for truckers and fleet managers. For more information, contact us at info@perdiemplus.com or visit www.perdiemplus.com
Mark is tax counsel for Per Diem Plus. With nearly two decades of experience advising trucking companies on per diem issues, Mark was responsible for defining the Per Diem Plus software logic rules that automatically calculates trucker per diem in accordance with IRS regulations.
In addition to his time working with Per Diem Plus, Mark works in private practice as an Enrolled Agent at Mark Sullivan Consulting, PLLC specializing in federal tax controversy representation and consulting. He also served as the consulting and expert witness for the Federal Defenders Office and private defense counsel in financial crimes cases in multiple federal district courts. Conta
Copyright 2023 Per Diem Plus, LLC. Per Diem Plus proprietary software is the trademark of Per Diem Plus, LLC.®
Help us test and develop features and functionality of our integration with Per Diem Plus Fleets for Motive (Keeptruckin) beta. Per Diem Plus® Fleets API is a configurable, ELD-integrated enterprise platform that automates administration of an IRS-compliant accountable per diem plan for truck drivers and fleet managers.
Truckers designed. Tax pros built it. Your drivers want it. It takes only minutes to start up an IRS-compliant per diem plan with Per Diem Plus Fleets for Motive (Keeptruckin).
Take a deep dive into the benefits of offering per diem, for both your company and drivers.
Benefits:
Although Congress temporarily increased the trucker per diem deduction to 100% for 2021 and 2022, there is a common misconception in the industry that at 80% deductibility per diem will not save a motor carrier money. The below tables prove otherwise.
The following analysis assumes 2,500 average weekly miles / driver; $69 per diem; $75,000 annual driver wages; 255 nights away from home; a 12% effective federal income tax rate, and $10/$100 workers' comp rate.
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Per Diem Plus is the leading provider of cloud-based, IRS-compliant trucker per diem software solutions in the transportation industry. Established in 2015, Per Diem Plus was born over the founders 30 years of individual experience as IRS agents and tax practitioners and a relentless pursuit to introduce efficiency to the time-consuming task of per diem tax compliance for truckers and fleet managers. For more information, contact us at info@perdiemplus.com or visit www.perdiemplus.com
On Monday, November 21, 2022, Mark W. Sullivan, EA, Tax Counsel for Per Diem Plus hosted a webinar for the American Trucking Association titled, "Unlock Fleet Savings With Per Diem Amid Economic Uncertainty". The following are excerpts from that presentation.
The freight market has experienced steady softening over the past few months while the nationwide average price for a gallon of diesel fuel hovering around $5.36 or about $2.02 more than just one-year ago1. So how can fleets mitigate the exploding cost of fuel and softening freight rates2? Use per diem compliance tech to unlock fleet savings amid economic uncertainty and record inflation.
An automated telematic solution, like Per Diem Plus®, allows motor carriers to rapidly deploy a solution to realize immediate savings, offset pain at the pump and boost driver pay. Additionally, our cloud-based mobile-enabled platform offers flexible Service Plan Options allowing motor carriers to easily implement an IRS-compliant fleet per diem plan that:
“We are seeing increased inflationary pressures throughout the business," U.S. Xpress CEO Eric Fuller said during a May 5 call. "Wages, both office and driver, are increasing [and] new equipment prices, insurance, maintenance, and fuel expenses are all up. Taken together, the cost of doing business is increasing across our industry.”1
FleetOwner, May 23, 2022
Although Congress temporarily increased the trucker per diem deduction to 100% for 2021 and 2022, there is a common misconception in the industry that at 80% deductibility per diem will not save a motor carrier money. The below tables prove otherwise.
The following analysis assumes 2,500 average weekly miles / driver; $69 per diem; $65,000 annual driver wages; 255 nights away from home; a 12% effective federal income tax rate, and $10/$100 workers' comp rate.
Twenty-three states are members of the National Council on Compensation Insurance (NCCI), 39 rely on NCCI regulations. Under NCCI rules a motor carrier paying substantiated per diem under an IRS-accountable plan can exclude up to $69/day of per diem from taxable wages, which provides a significant per driver annual savings to a fleet3.
With growing economic uncertainty and recessionary clouds on the horizon it is not known if Congress will extend the 100% deduction for per diem. However, a motor carrier that implements Per Diem Plus will be in a stronger position to weather the economic storm.
As of January 1, 2018, employee drivers can no longer claim per diem as an itemized deduction on their federal income tax return. However, motor carriers can offer per diem to employee drivers to recapture the lost tax savings. The average Married over-the-road driver earning $65,000 annually will save approximately $3,457 in federal income taxes equivalent to $0.03 cents per mile.
The average Single over-the-road driver earning $65,000 annually will save approximately $4,485 in federal income taxes equivalent to $0.04 cents per mile.
GPS-Based Tracking: Per Diem Plus® utilizes telematics to establish IRS-required “time, date and place” substantiation to prove away-from-home travel.
Proven: Drivers have logged millions of miles using Per Diem Plus! Join those that value their time, love to eliminate inefficient paperwork, and want to simplify tax compliance and save money.
Easy Setup: Our IRS-compliant cloud-based ELD-integrated platform and mobile app solutions allow for rapid deployment with minimal investment in IT resources.
Easy to Use: Web services interface that allows non-technical users to manage individual and team drivers.
Scalable: Whether 5 or 15,000 trucks, our secure cloud-based platform will meet the growing needs of your fleet.
Data Plan Friendly: An average driver using our mobile app solution will use less than 50MB per month.
Per Diem Plus Fleets is also available on the Samsara App Marketplace and Platform Science Marketplace
For more information, contact us at info@perdiemplus.com or visit www.perdiemplus.com
Per Diem Plus is the leading provider of cloud-based, IRS-compliant trucker per diem software solutions in the transportation industry. Established in 2015, Per Diem Plus was born over the founders 30 years of experience as IRS agents and tax practitioners and a relentless pursuit to introduce efficiency to the time-consuming task of per diem tax compliance for truckers and fleet managers. For more information, contact us at info@perdiemplus.com or visit www.perdiemplus.com
Mark is tax counsel for Per Diem Plus. With nearly two decades of experience advising trucking companies on per diem issues, Mark was responsible for defining the Per Diem Plus software logic rules that automatically calculates trucker per diem in accordance with IRS regulations. He also previously served as the consulting per diem tax expert for Omnitracs.
In addition to his time working with Per Diem Plus, Mark works in private practice as an Enrolled Agent at Mark Sullivan Consulting, PLLC specializing in federal tax controversy representation and consulting. He also served as the consulting and expert witness for the Federal Defenders Office and private defense counsel in financial crimes cases in multiple federal district courts. Contact Mark W. Sullivan, EA
Copyright 2022 Per Diem Plus, LLC. Per Diem Plus proprietary software is the trademark of Per Diem Plus, LLC.®
1 Kingston, John, "Weekly DOE/EIA diesel price decline is biggest since 2008", Freightwaves, July 25, 2022 LINK
2 Achelpohl, Scott, "Survey points to exodus of small operators - and fuel costs as the culprit", FleetOwner, May 23, 2022 LINK
3 North Carolina allows a $75 exemption for per diem Rule 2-B-2 LINK
Is trucker per diem an improper wage reclassification? No, the treatment of a portion of an employee’s wages as per diem has been unique to the transportation industry for over 30 years 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. The first published guidance for the transportation industry was issued in 1991 where, according to the IRS, a driver's weekly compensation earned on a cents-per-mile basis may be reclassified by amounts designated as per diem (i.e. $66/day) for meals and incidental expenses after determining how many days a driver was away from home overnight [TAM 9146003].
Related Article: Part II: Is Trucker Per Diem An Improper Wager Reclassification
IRS Issues 2024 Trucker Per Diem Rates (9/25/23)
Yes. The IRS introduced the Special Transportation Industry substantiated per diem method 20 years ago in Rev. Proc. 2000-39, 2000-9 Sec. 4.04 [Notice 2000-48], which among other things:
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The 2017 Tax Cuts and Jobs Act eliminated per diem as an itemized deduction on drivers individual income tax returns. As a result, interest from employees in company-sponsored per diem plans swelled as drivers sought to offset the lost deduction [about $19,000 for an average OTR driver]. Since, drivers were prohibited from using the decades-old industry standard cent-per-mile per diem method, motor carriers embraced the parity to drivers substantiated per diem provided.
Unfortunately, they discovered the IRS never published a basic instructions for implementing a substantiated per diem program or payroll process for reclassifying a portion of wages to daily rate per diem. In fact, the last comprehensive guidance issued by IRS on substantiated per diem method was Rev. Proc. 2011-47, however, it was silent on wage reclassification for per diem. So too was the last relevant court case, Beech Trucking, Inc. v. IRS (USTC 2002). The only published guidance that referenced "wage recharacterization" could be found in the Rev. Rul. 2012-25.
IRS issued Rev. Rul. 2012-25 in response to an emerging audit trend whereby businesses that did not historically offer per diem were implementing abusive per diem plans that recharacterized taxable wages as nontaxable reimbursements or allowances. Although unrelated to trucking the tax practitioner community, and especially those that offered cent-per-mile per diem audit services, elevated the ruling to misplaced prominence.
No. Based on the foregoing Rev. Rul. 2012-25 is inapplicable to transportation industry:
The employer’s cited in 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].
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). The employer treats $1,584 as a pre-tax deduction; calculated withholdings; adds per diem to payroll as a non-taxable reimbursement.
2. A truck driver is paid 45 cents-per-mile. The employer classifies 10 cents-per-mile to a 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). The employer calculates taxable wages at 35 cents-per-mile and per diem at 10 cents-per-mile as a non-taxable reimbursement.
Although, a driver may travel 600 miles one day but only 100 miles the next, the distance traveled does not affect the need to eat 3 meals a day. As a result, substantiated per diem accurately reflects the definition of per diem in Rev. Proc. 2011-47 section 3.01: "Paid for ordinary and necessary business expenses 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." Thus, the IRS introduced the Special Transportation Industry substantiated per diem to enhance and 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:
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 2011.
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.
Per Diem Plus FLEETS is a configurable mobile application enterprise platform that automates administration of an IRS-compliant accountable per diem plan for truck drivers and fleets managers. No matter how big or small your company is, Per Diem Plus has a solution for you.
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 enabled solution that automatically tracks each qualifying day of travel in the USA & Canada for solo and team drivers and replaces ELD backups (logbooks) to substantiate away-from-home travel.
Mark is tax counsel for Per Diem Plus. With nearly two decades of experience advising trucking companies on per diem issues, Mark was responsible for defining the Per Diem Plus software logic rules that automatically calculates trucker per diem in accordance with IRS regulations. He also previously served as the consulting per diem tax expert for Omnitracs.
In addition to his time working with Per Diem Plus, Mark works in private practice as an Enrolled Agent at Mark Sullivan Consulting, PLLC specializing in federal tax controversy representation and consulting. He also served as the consulting and expert witness for the Federal Defenders Office and private defense counsel in financial crimes cases in multiple federal district courts. Contact Mark W. Sullivan, EA
Copyright 2020-2022 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.
[i] The 2019 per diem rate for travel in the USA is $66 and $49.50 for a partial day.
ii] The IRS 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 2019-55, 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.
