For Diem or CPM?

How many trucking companies are still recovering from the recent high fuel prices and contemplating the uncertainties of future economic times, pay per diem plan is rearing its head more and more. The trucking companies are beginning to "push" toward this option to pay the other driver, as to the more standard roll of cents per mile pay. Many drivers are still confused about this situation, per diem, and rightfully so. Anything relating to governmental taxes may be difficult to understand. So which plan is the best plan? Pay per diem or CPM?

The plan allowance is presumably calculated to give the driver the maximum savings possible under the rules of the IRS. The transport company will start with the basic rate of mileage drivers and then apply the tax reduction diem amount for a certain rate CPM. For illustrative purposes, we use the intensity reduction of 11.5 CPM. Taxes pilots will then be calculated on that reduced amount. So if the trucking company is paying .10 cents a mile back as per diem, this qualifies as a non-taxable reimbursement, rather than showing as taxable income. The company will then be the difference of 1.5 cents and use this to offset the tax administration and further that the company may incur.

The per diem pay plan reclassifies a portion of your paycheck as "expenses" rather than actual income. Therefore, the taxable income is lower. In return, this will affect many other benefits that are calculated off of taxable income such as workers' compensation, disability claims, unemployment benefits and the most important ... social security benefits.

Moreover, an important aspect to remember is that by showing a lower taxable income, this could very well reduce the ability to borrow money at a decent rate, and to be able to get credit. This is because, of course, that banks and lenders look at your total income when basing their decision on extending loans and credit. Another important factor that could be stopped by using the per diem, is a profit sharing plan of your company can offer. Profit sharing plans are mostly based on the taxable income and any savings in income taxes you may receive from using the per diem plan, would reduce the profit-sharing contributions.

To pay Diem used to indicate the amount that the company would have the driver, beyond the regular wages earned, to pay for meals while on the road to perform the work. However, it is now a way for trucking companies to reduce taxes by reducing the taxes of the pilots, but the bad drivers in the ways described above. The plan results in annual income allowance of pilots to look smaller, which in turn, can cause problems when applying for loans and credit.

Also keep in mind that the per diem portion of the driver receives is tax free when the trucking company that pays. At the end of the year, if the driver was paid more than what the IRS allows, then the driver ... no ... the company must pay the difference in taxes. We all have to pay taxes anyway. Why give up hundreds of dollars that will cost us our entire life earnings in order to "bring home" $ ​​35 to $ 75 more a week? The drivers are basically trading their future retirement income, while the transport company is increasing their daily earnings, reducing the tax burden.

The trucking companies are really the ones benefiting from the plan pay per diem. The company will pay less unemployment taxes, Medicare, Social Security and driver pay. The per diem pay plan can dramatically reduce the future benefits of the pilots of Social Security and other retirement plans such as 401K.

Always check with your accountant specializing in the transport sector, if you are still unsure about the plan to pay per diem. Trucking companies are in business to make money. Every company is in business to make money, which is understandable. Just remember, the plane of the transport company is pushing for the driver to use, the plan is often the driver wants to stay away from most. As for me, I would always go with the CPM compensation plan ....