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Transportation Brief: Per Diem Plan – Is Now the Time?

by Steven A. Pletcher

January 21, 2019

The Tax Cuts and Jobs Act (the Act) has now been effective for just over a year.  Many drivers may only now come to fully appreciate the impact of certain provisions of the Act as they prepare their 2018 tax returns. While the Act nearly doubled the standard deduction for all taxpayers, it eliminated many personal deductions. Accordingly, OTR drivers for motor carriers that do not sponsor a per diem expense reimbursement program can no longer deduct meals and incidental expenses (M&IE) on their individual tax returns. 

This can have a significant impact on OTR drivers because up to $63 per day ($66 in 2019) is no longer available for a deduction.  Motor carriers may be lobbied by OTR drivers to set up a per diem program to continue to take advantage of the M&IE deduction.  Although the Act took away the business expense deductions for individuals, it allows employers to provide business expense reimbursements to employees on a tax-free basis. Motor carriers that do not provide a per diem program could face a driver recruiting and retention hurdle as OTR drivers come to fully appreciate the impact of the loss of the personal deduction.

Establishing a per diem program is not overly complicated, but motor carriers should be mindful when implementing a per diem plan to ensure compliance with the IRS “accountable plan” rules, requiring substantiation, business connection, and the return of any excess non-substantiated reimbursement. While this seems straightforward, implementation and compliance with the accountable plan rules can be tricky, and failure to comply may result in disqualification of the plan and assessment of employment tax on all reimbursed expenses. 

 

Scopelitis’ Transportation Brief® is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.


 

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