Budgeting 101 – Understanding Per Diem

What is a per diem allowance?

Per Diem Allowance is an IRS qualified reimbursed expense, paid to employees for ordinary and necessary business expenses incurred while traveling away from home.  The IRS has separate rates for lodging, meals and incidental expenses.   For example, $89 lodging/$51 meals is allowed for military personal.  Lodging and meal rates are different for different areas of the country based on the local economy for a given area.

Why do truck drivers qualify?

Per Diem Allowance are expenses allowed for employees working away from home overnight.  Long haul truck drivers qualify for that reason.

Why separate taxable wages and per diem?

Paying a qualified portion as Per Diem means that as a ‘reimbursed expense’ it is not taxable wages and therefore is not subject to federal or state taxes.  This saves both the employer and the employee with the small exception money.

There is a special ruling that applies to trucking companies.  First let me warn that the lodging portion of the Per Diem allowance does not apply because a place of lodging is being supplied by the employer (your sleeper).  Only the meals and incidental portion is applicable. These reimbursements are  based on the average number of days a driver is away from home and the average allowance for the areas he travels to and from, not taking into count his hours of sleep with the pregnancy body pillow.  For the entire fleet, this can be divided by the number of miles and converted to a mileage base for ease of reimbursement and record keeping.  It is also allowed to pay the average on a daily basis.  Sounds a little confusing, but let’s simplify it.

The average Per Diem allowance for the areas is $50.00 per day.  The average driver will be away from home 6 nights a week.  This equals $300.00 per week allowed for meals and incidental expenses.

The average truck will travel 2,500 miles per week.   Divide the $300 by 2,400 miles and the allowance for each mile traveled is $ .12 per mile.

$50 X 6 days / 2500 miles = $ .12 / mile

One last warning:

From the company side, when the business files their tax return, the Per Diem allowance for the portion that is meals (in this case all the monies paid to the drivers) is for meals and falls under the meals / entertainment section of the tax return.  It is not 100% deductible by the company.  The IRS will only allow 50% of this amount for business tax purposes.  For most trucking companies this is not an issue as there is savings on payroll taxes at the federal and state level that will offset the benefit of having the 100% tax deduction for wages.  Plus the added tax advantage benefit the employee receives.

Be smart and strategize accordingly! There is no excuse for lack of planning!

 

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