July 20th, 2026
Executive Summary
Every January, trucking companies receive the same phone calls:
“My W-2 is wrong.”
“My tax refund is smaller than last year.”
“Did payroll make a mistake?”
If your company offers a compliant truck driver per diem program, these questions are completely normal.
In most cases, nothing is wrong.
Per diem lowers a driver’s taxable wages while keeping their overall compensation the same. That means less federal income tax is withheld during the year. As a result, many drivers receive a smaller tax refund, or in some cases owe money when they file their return.
The key is education. Companies that explain how per diem affects taxes before enrollment experience far fewer confused phone calls during tax season.
Who Is This For?
This article is for:
- Trucking company owners
- Safety and HR managers
- Payroll administrators
- Trucking accountants and bookkeepers
- Anyone responsible for payroll for trucking companies
- Truck drivers who participate in a per diem program
A Smaller Tax Refund Doesn’t Mean Payroll Did Anything Wrong
One of the biggest misconceptions drivers have is believing a smaller refund automatically means someone made a mistake.
Usually, the opposite is true.
Imagine two drivers:
- They drive the same routes.
- They earn the same gross compensation.
- They work for the same company.
The only difference is that one participates in a compliant per diem program while the other does not.
When their W-2s arrive, they will look different.
The driver receiving per diem will generally have:
- Lower taxable wages (Box 1)
- Less federal income tax withheld (Box 2)
- Lower Social Security wages
- Lower Medicare wages
Nothing is missing.
Their compensation simply moved from taxable wages into a qualified reimbursement.
That is exactly how per diem is designed to work.
Understanding Tax Refunds
Many people celebrate a large tax refund.
There’s nothing wrong with that.
But it’s important to understand what a refund actually represents.
A tax refund is not extra money.
It’s money that was overpaid to the IRS during the year.
Think about paying an extra $20 every time you buy lunch.
At the end of the year, the restaurant hands all that money back to you.
You didn’t make money.
You simply got your own money returned.
Taxes work the same way.
Per diem usually reduces withholding throughout the year.
That means drivers often receive more money in every paycheck and less money back after filing their tax return.
For many drivers, that’s actually the better financial outcome.
Why Per Diem Changes a W-2
Per diem is intended to reduce taxable wages—not gross compensation.
That’s an important distinction.
Drivers still earn the same overall compensation.
Part of that compensation simply becomes a qualified travel reimbursement rather than taxable income.
A similar example is employer-paid health insurance.
Health insurance is part of an employee’s total compensation, but it generally isn’t taxable income.
Per diem works in much the same way for qualifying drivers.
When properly administered, the program is functioning exactly as Congress and the IRS intended.
A Smaller Refund Isn’t Always About Per Diem
One of the biggest mistakes people make at tax time is confusing correlation with causation.
A driver may notice:
“We started per diem this year and my refund is smaller.”
That doesn’t necessarily mean per diem caused it.
Many other factors affect a tax return, including:
- A spouse changing jobs
- Additional self-employment income
- Investment income
- Child tax credit changes
- College tuition credits
- Energy efficiency tax credits
- Changes to deductions
- Multiple jobs
- W-4 withholding elections
Payroll only knows about payroll.
Your tax return includes your entire financial life.
That’s why two drivers with identical paychecks can have completely different tax outcomes.
Why Trucking Companies Should Educate Drivers Early
The best time to explain per diem is before drivers enroll.
Not after W-2s are mailed.
Companies that discuss per diem during orientation typically receive far fewer calls during tax season.
Drivers should understand:
- Taxable wages will likely decrease.
- Federal withholding will likely decrease.
- Their refund may be smaller.
- None of that means payroll made a mistake.
Setting expectations early builds trust.
Waiting until January creates confusion.
Never Give Tax Advice
This is one of the most important lessons for anyone involved in Truck Driver Payroll.
HR professionals.
Payroll staff.
Fleet managers.
Dispatchers.
None of them should provide personal tax advice.
Instead:
- Explain how your company’s per diem program works.
- Explain what changes drivers may see on their W-2.
- Encourage drivers to consult their personal tax professional regarding their individual tax situation.
Every driver’s tax return is different.
Avoid stepping into a conversation that belongs between the driver and their tax preparer.
Make Per Diem Enrollment Part of Orientation
One of the easiest ways to prevent confusion is documenting the conversation.
Many trucking companies include a per diem election form that allows drivers to:
- Opt in
- Opt out
- Acknowledge they understand how per diem affects taxable wages
That simple conversation can eliminate many of the questions that arrive every January.
Education today prevents frustration later.
Good Trucking Payroll Services Do More Than Process Paychecks
The best trucking payroll services don’t simply calculate payroll.
They educate clients.
They help trucking companies implement compliant per diem programs.
They explain IRS requirements.
They prepare companies for driver questions before they become problems.
A payroll company that understands trucking can help protect both compliance and driver satisfaction.
Final Thoughts
Per diem doesn’t reduce what qualifying drivers earn.
It changes how part of that compensation is taxed.
That means:
- Lower taxable wages
- Lower withholding
- Often a smaller refund
- More take-home pay throughout the year
Those outcomes are usually signs that the program worked exactly as intended.
The trucking companies with the fewest tax-season surprises aren’t lucky.
They simply educated their drivers long before the W-2s arrived.
Frequently Asked Questions
Per diem reduces your taxable wages, which usually means less federal income tax is withheld during the year. Less withholding often results in a smaller refund, even though you likely received more take-home pay throughout the year.
No. If your company administers per diem correctly, lower taxable wages are expected. A different W-2 is often evidence that the program worked properly.
No. Qualified per diem changes how part of your compensation is taxed. It does not reduce your overall compensation.
No. Payroll should explain how your paycheck and W-2 were calculated, but personal tax advice should come from your tax professional.
Drivers should understand that taxable wages, tax withholding, and potentially their refund will change. Setting expectations early greatly reduces confusion during tax season.
Specialized trucking payroll services understand truck driver per diem, mileage pay, multi-state payroll, driver compensation, and the unique compliance issues involved in payroll for trucking companies. That expertise helps reduce errors, improve compliance, and build trust with drivers.
Written by
Mike Ritzema
Mike Ritzema founded Superior Trucking Payroll Service after years as a trucking CFO — so he knows the industry from the inside out. He writes about payroll, per diem, and driver pay with one goal: making life easier for trucking families. When he’s not solving payroll problems, you’ll find him crossing another MLB stadium off his bucket list.