Our tax experts jotted down some common per diem questions that fleet customers have asked us.
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What is per diem?
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.
- 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.
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.
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.
Copyright 2019 Per Diem Plus, LLC. Per Diem Plus proprietary software is the trademark of Per Diem Plus, LLC.®