"Per Diem", as it relates to how trucking companies pay their drivers, is a portion of their salary paid to the driver un-taxed, technically as a meal and expense reimbursement.
Company drivers used to be able to deduct their per diem. As of the beginning of 2018 that has gone away. Some drivers want their company to continue to pay them a per diem, and some companies are doing so, but not all. Why do some companies hesitate to offer you a per diem?
The 80% Rule
For Shelley Koch, K & J President, the number one cause of companies refusing is that they can't fully deduct the per diem cost. For example, if a company gave a driver a $50 per diem, only 80% of that is actually deductible on the employer's taxes as of 2018. This means that the company offering the per diem is theoretically paying $10 out of their own pocket to supply the $50 per diem to their driver.
But there are definitely other savings that an employer can take advantage of that can reduce that out of pocket amount even further. Companies don't pay FICA or worker's comp on per diem monies because it is a reimbursement not a wage.
Even with these deductions, at the end of the day companies will still take a slight loss if they choose to offer company drivers a per diem. For Shelley, she figured this cost was around $6 a day, or the cost of a really nice latte (at an overpriced coffee shop). Remember, this cost is per company driver, so it is easy to see why some companies hesitate to offer per diem benefits.
The second reason companies hesitate to offer per diem to company drivers is bookkeeping. Because company drivers used to be able to deduct 80% of their per diem on their own, companies rarely got involved. If a company driver chose to claim per diem on their taxes, that was between them and their accountant. By taking over the per diem responsibility, companies are bringing on a large accounting burden that has the potential to cause issues and headaches.
Some Still Offer It, But Why?
With these headaches, why do some companies, like K & J, still offer company drivers per diem in 2018? Because some drivers want it. It is really that simple. Doing what is right by our drivers and customers is the K & J way. For some, having a lower taxable income makes a huge difference.
We tend to see this most with younger drivers. Oftentimes older drivers are okay with the higher taxable base because of the way that Social Security is calculated as an average of your highest earning years. Drivers close to retirement age should definitely consult with a tax professional to discuss the benefits and costs of taking per diem.
What Do You Think?
Still confused? We would love to answer your specific questions. Let us know in the comments below and we will do our best to feature them on an upcoming blog!