In the trucking industry, per diem pay is the reimbursement paid to the driver as part of the costs incurred for meals and other incidental expenses while on the job. Hence, per diem pay is technically not taxed by the IRS. It is counted as part of your salary under ‘meals and incidental expenses reimbursement’ but it is not taxed or counted as part of your gross income. However, like every non-taxable expense, there are limits set by the IRA for truck drivers and trucking companies.
For truck drivers to have their per diem pay to be pre-paid and not be taxed by the IRS, the following conditions must be met:
- There must be accountable per diem pay records or calculations. That is why trucking companies require drivers to submit receipts for meals and expenses incurred while on the job. A credit card digital footprint is also used to keep track of the per diem records.
- The driver must work away from home longer than a normal day’s work timeframe. If every day you wake up at your home and your shift ends close to your place, you are not qualified for a per diem pay.
- Of course, you must have a residential address which you consider a home.
- The per diem pay must not exceed the maximum allowance set by the IRS. For instance, the standard per diem rate set up by the IRS for meals is $63 per day. If your per diem pay for meals exceeds $63 per day then it will be taxed.
Just because the daily per diem rate for meals is $63 does not mean you have to spend that exact same amount. The same applies to lodging allowance and other incidental expenses. Sometimes truck drivers spend less than the per diem allowance and save on some extra change. However, there are limits when truck drivers are asked to provide receipts prior to reimbursement. Regardless, there are trucking companies that give out the standard per diem pay to avoid inconvenience. Of course, per diem pay lowers the gross income of commercial drivers and lowers their taxes which in turn can benefit truckers to be eligible for lower insurance premiums, student grants, public assistance, and loans.
Since banks tend to favor individuals with high gross income numbers, per diem pay reduces their loan limit. Other aspects that are likely affected include mortgage and unemployment insurance. Not to forget the lower your gross income, the lower your retirement benefits package which includes Medicare and social security benefits. Of course, the IRS standard meal and travel allowance will not be deducted during your annual taxation since IRS considers per diem as reimbursement. In fact, if your per diem pay is more than the IRS standard meal and travel allowance, the IRS will likely tax both the overpayment and the per diem pay like regular income. But that liability should fall on the company and not on the driver.
Calculating the accurate per diem pay is complicated since there are additional administrative costs. However, trucking companies and truck drivers often use specialized software such as TruckMaster to easily calculate the statistics. The General Service Administration (GSA) sets up the per diem rate for meals, lodging, and incidental expenses to be used by federal employees whenever they are traveling on duty. The IRS adapts the same per diem amount to be used by truckers. Although according to the IRS table, the per diem pay for meals and incidental expenses depends on the location. The rates usually change during September or October. Once the new rates are out, the company has an option to use the new rates or continue to use the current per diem rates. In case the company sticks to the previous rate, the per diem should remain constant till the rest of the year.
Transportation companies can also calculate per diem pay per mile but it needs to be constantly monitored to make sure it does not surpass the standard amount set up by the IRS. Running the per diem program can be expensive considering the administrative costs incurred to monitor the situation. Hence, it is important to keep a record of distance mileage and related expenses on daily basis by highlighting the following items;
- Date of the travel
- Which area, town or city are you going?
- What is your purpose for the trip?
- Odometer reading – total distance for the travel (Ending mileage deducted by starting mileage)
- Truck expenses i.e gas, toll, oil e.t.c
- Meals and incidental expenses (Breakfast, lunch, dinner, and lodging) Do not exceed the limit since you will not be reimbursed spending costs past the limit.
Truck drivers should keep in mind that per diem pay is simply reimbursement for incidental expenses incurred on the job and nothing else. In fact, a driver who usually gets per diem pay usually takes home almost the same amount of salary as a driver who is not entitled to per diem pay.