Our tax expert responds to a common question we receive from drivers and fleets.
Substantiated provides the largest benefit to a driver. Decades before the advent of TMS software, telematics and ELD's fleets adopted cent-per-mile per diem for reimbursable employee travel expenses because it was easy to calculate and substantiate using trip sheets[i]. However, there is no correlation between the miles a driver travels and frequency of meal breaks. Under the cent-per-mile method a driver is paid only for miles driven and not nights away from home. Although, a driver may travel 500 miles one day but only 200 miles the next, the distance traveled does not affect the need to eat 3 meals a day. The IRS introduced the Special Transportation Industry substantiated per diem to simplify tax compliance for fleets by relying on days away from home instead of miles traveled. This method accurately reflects the number of meals a driver eats and resolved the problem that driver’s regularly travel away from home and stop during a single trip at localities with differing federal M&IE rates.
- The most beneficial aspect to a driver is that substantiated method at $66/day yields on average 45% more per diem than cent-per-mile.
- Substantiated per diem can be earned during a 34-hour restart and unforeseen delays like detention, breakdowns, or weather.
- A typical driver will save an additional $1,100 - $1,400 in income and payroll taxes over cent-per-mile.
- Fleets that implement the Per Diem Plus FLEETS platform will save about 37% or $800 more per driver in reduced payroll and income taxes and workers compensation than cent-per-mile.
[i] 1-274-5T(c) Rules of substantiation, Rev. Proc. 2011-47 § 4.02(5)
While, both the substantiated and cent-per-mile per diem methods are IRS-compliant, neither method has been considered a wage reclassification for 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.
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.