Your per diem policy could get you in trouble with the IRS!
Over the years I’ve had the pleasure of speaking to hundreds of trucking companies. One of the first questions I ask them is “Do you pay per diem?” The replies I get on how they pay per diem are all over the board. Usually, they fall into three categories, Per diem paid by the day, by miles, and by percentage of pay. Two of these three can get you in trouble with the IRS!
The IRS regulations on per diem clearly state that you may pay up to $59 per day for DOT hours of service-regulated employees that travel in multiple meals and incidentals (M & I) markets. They also say that if you pay per diem another way, it cannot exceed that $59/day number. Well, let’s look at an example. If a driver is paid nine cents per mile as per diem and the rest as wage, if he runs over 655 miles in any day, you are outside the IRS regulation and exposed to extra government intervention. A driver who is paid per diem as a percentage of his wage could have the same issue. We all know the government needs money and this gives them an opportunity to get it from you!
The other problem with paying per diem as a percentage or per mile is when you do not run 655 miles that day, you are losing out on some of the financial benefits of paying per diem! The reason you pay per diem in the first place is to save money on your worker’s compensation insurance so why not make the most of it?
If your driver in the above example only drives 400 miles that day due to stops or weather. At nine cents per mile, the driver gets $36.00 in per diem that day. You could have avoided paying worker’s compensation insurance by another $23.00 saving you a couple more dollars. Sure two dollars won’t make a big difference but when you multiply it times the number of drivers times the few days per week times 52 weeks it can be significant! 100 drivers that are paid $50 per week less in per diem at a 9% worker’s compensation rate = $23,400 in lost profit for your company.
We want to help you stay in compliance with IRS regulations and maximize your profitability. To help achieve this, we’ll provide a no-cost assessment of your per diem practices and we’ll show you where you are out of compliance and how much more profit you could be making by paying per diem properly. Email me or call us at (616) 608-1800 to set up your free assessment.
