Per diem for truckers is one of the most important benefits offered by some trucking companies to attract professional truck drivers. When you first start out as a trucker, the first change in your lifestyle involves having to buy food and snacks on the road because you are away from your home for long periods of time. To get you started, some trucking companies provide per diem for drivers. Meals are one of the most important per diem items for most truck drivers.
The term per diem translates from Latin as “per day.” So it’s a way to offset your daily expenses while you’re on the road. Remember that the IRS does not technically tax per diem.
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And in this article we will review the basic questions about it.
What is a per diem program for truckers?
OTR drivers benefit from the per diem program, as it offers an additional cash allowance on a per-tax basis while reducing the workload of their employer. Depending on the driver’s location, they can receive up to $66 per night of work when traveling within the continental US, and $71 when outside the US. This additional amount helps them remain on the road for longer periods and reduces admin time for the company.
How does it work?
Companies often offer their employees the choice of per diem and meal allowance payment options when traveling for business. Per diems are generally tax-free and are subtracted from your paychecks, while meal allowances are based on a standard rate of $63.
Employees who opt for the per diem option come tax season will be required to report the exact amount they made throughout the year and can expect a tax refund of the total amount. For those who instead choose to receive a meal allowance, the Internal Revenue Service allows truck drivers to deduct up to eighty percent of their total expenses. This is beneficial for many as the driver would only be taxed on the remaining twenty percent of the standard meal allowance of $63.
Staying on top of finances while on a business journey is key to maximize the experience – from cash to cards, explore all payment options before embarking on your adventure. Per diem and meal allowances can provide travelers with a sense of relief and financial security when away from home. On the tax front, one must remember that the IRS is strict and it is important to remain diligent when dealing with such issues. Planning ahead and collaborating with colleagues will ensure your business trip is productive and successful. Get the most out of your travel by doing your research and consulting the necessary professionals.
Advantages of the per diem program
A per diem program is an attractive option for many people who travel frequently and need to manage their expenses. By paying money up-front, you can easily reimburse your daily food and lodgings without worrying about deadlines. But this payment method also offers other positives.
Having access to tax-free money means more budgeting freedom and a larger paycheck. Additionally, per diem reduces the amount of income you need to report and can be a great help when applying for student loans or government aid.
The great thing about using per diem is that it saves you some time when managing incomes, since most companies using this payment system are responsible for taking care of the tax-related tasks. Drivers can stop worrying, as this keeps them focused on the task ahead.
Disadvantages of per diem payments
A per diem is a popular payment option for employees who often travel, and it offers various financial incentives. Aside from reducing a person’s taxable income, a per diem also increases the amount of money kept in hand. However, there are also some drawbacks to taking a per diem as payment. Per diems lower an employee’s annual salary, which can decrease their chances of getting credit. Additionally, since a per diem is an untaxed income, the amount of unemployment benefits or total worker’s compensation will be greatly reduced if needed. Furthermore, employee contributions to a 401K are not applicable to a per diem; however, there are other retirement funds that can accept a portion of the extra pay.
Some facts about per diem for truck drivers
Receiving a per diem comes with the tradeoff of no standard deduction for meals when filing taxes. Surprisingly, many US truckers end up with similar paychecks at the end of the year. This is beneficial for trucking companies too – because per diem payments mean lower wages and thus lower payroll taxes. However much a driver receives in per diem, it’s clear that it offers advantages for both companies and drivers.
Keeping all receipts is an important part of claiming per diem expenses on your trips, as company accountants require proof of items and places purchased. Self-employed truckers must also provide proof of expenses in case the IRS has questions. Therefore, using credit cards is the most efficient way to get the necessary documentation for all purchases. Saving receipts will help make filing taxes much easier and more accurate.
So per diem has its pros and cons. If you can afford all the range of the travel expenses without receiving a payroll advance and can wait until the end of the year to deduct the per diem from your taxes, then there is no point in taking a per diem.
Finally, it all comes down to your personal preference. Before you make your decision for a per diem, it’s worth thinking carefully about whether you need the money to cover your travel expenses or whether you have enough in your savings to pay for your daily expenses until you start getting a regular paycheck.