A Catch 22 For Drivers
Drivers currently retain ownership of their paper logbooks to comply with the IRS income tax regulations. Now that the U.S. Court of Appeals for the Seventh Circuit has upheld the ELD mandate and ruled that the FMCSA has satisfied the objections made by the Owner Operators Independent Drivers Association, who will “own” the logbook data1? While the media is awash with articles either applauding or deriding the court's decision, everyone has overlooked the mandate’s impact on tax compliance recordkeeping obligations for individual truck drivers. Everyone but Per Diem Plus.
The history of the IRS is that they ONLY accept driver DOT logbooks as proof of overnight truck driving trips to substantiate travel expenses, like per diem. Treasury Regulation 1.274-5A(c)(2) governs the rules for substantiation of travel expenses. A logbooks meets the requirements because it is a contemporaneous record that is created "at or near the time the expense or travel occurred"2 and establishes the "time, date and place" of the travel3. Contrary to popular belief a calendar or bookkeeper’s guesstimate worksheet of per diem trips does not fulfill these statutory requirements.
A Statutory Conflict - 6 month / 3 year rules
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 months4. But...
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.
Drivers currently retain their logbooks to comply with income tax reporting and filing obligations. However, in my experience, since motor carriers own the ELD device they will assert ownership of the ELD data as well. And while fleets retain certain records required by FMCSA to comply with tax regulations, those using ELD’s promptly discard driver logbooks after 6 months. More troublesome is the revelation that many large fleets who were early adopters of ELD’s are now refusing to provide copies of the e-logs to their drivers. Will this behavior permeate the industry as fleets transition from paper to electronic logs?
What this means to you is that you may not have access to ELD data that is critical to both accurately claiming per diem expenses and defending yourself in the event of an audit. This will be particularly true if a driver is employed by multiple fleets during a calendar year. In the end, drivers will find themselves in a Catch 22 - a driver can have only one logbook that the motor carrier will now own so a driver cannot properly file income tax returns as they no longer have access to the logbook data.
Drivers that use Per Diem Plus have access to their data for four years whether they are driving for a company or themselves. Own your data and simplify your life by using the Per Diem Plus mobile app.
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This article was written by Mark W. Sullivan of D R Sullivan & Company, CPA PC, an accounting firm that has been providing taxpayer advocacy, consulting, and litigation services since 1998. The firm has nearly a decade of experience advising motor carriers and telematics providers on IRS substantiated per diem and is tax counsel for Per Diem Plus®, an IRS-compliant automated per diem and expense tracking Android and iOS app.
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 2016 Per Diem Plus, LLC. Per Diem Plus proprietary software is the trademark of Per Diem Plus, LLC.
FMCSA Part 395 section 395.8(k)(1)
Supporting documents are the records of the motor carrier which are maintained in the ordinary course of business and used by the motor carrier to verify the information recorded on the driver’s record of duty status. Examples are: bills of lading, carrier pros, freight bills, dispatch records, electronic mobile communication/tracking records, gate record receipts, weight/scale tickets, fuel receipts, fuel billing statements, toll receipts, toll billing statements, port of entry receipts, cash advance receipts, delivery receipts, lumper receipts, interchange and inspection reports, lessor settlement sheets, over/short and damage reports, agricultural inspection reports, driver and vehicle examination reports, crash reports, telephone billing statements, credit card receipts, border crossing reports, custom declarations, traffic citations, and overweight/oversize permits and traffic citations. Supporting documents may include other documents which the motor carrier maintains and can be used to verify information on the driver’s records of duty status. If these records are maintained at locations other than the principal place of business but are not used by the motor carrier for verification purposes, they must be forwarded to the principal place of business upon a request by an authorized representative of the Federal Highway Administration (FHWA) or State official within 2 business days.
- Land Line Magazine (11/01/16)