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100% deduction for trucker per diem in COVID-19 Pandemic Relief Package confirmed by the IRS in Notice 2021-63 (12/6/2021)
[Update: The temporary 100% deduction for per diem expired on December 31, 2022]
Congress used a single line on page 4871 of the Consolidated Appropriations Act, 2021 (CAA) to allow the full deduction for per diem. Section 210 of the act temporarily raised the allowance of business meals (for food or beverages provided by a restaurant) under IRC § 274(n) to 100% from 50% for tax years 2021 and 2022.
The IRS issued Notice 2021-25 on April 8, 2021 (updated by Notice 2021-63 on December 6, 2021) that explains when the temporary 100-percent deduction applies and when the 50-percent limitation continues to apply for purposes of § 274 of the Internal Revenue Code (Code), as amended by § 210 of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Act), enacted as Division EE of the Consolidated Appropriations Act, 2021, Pub. L. No. 116- 260, 134 Stat. 1182 (December 27, 2020)
The IRS previously allowed motor carriers and self-employed truckers using the Special Transportation Industry per diem to deduct business meals at 80% under 274(n)(3). Unfortunately, Congress omitted any commentary on the interplay of 274(n)(1) and (3) in the CAA. On April 9, 2021, I called the Office of Associate Chief Counsel (Income Tax & Accounting) and obtained confirmation the temporary 100-percent deduction for business meal expenses applied to the transportation industry as well. The Associate Chief Counsel's opinion was affirmed by issuance of IRS Notice 2021-63 on December 6, 2021.
"Absolutely yes, we tried to allow as many taxpayers to use it as possible"
Deena Devereux, IRS Office of Associate Chief Counsel
26 U.S. Code § 274 - Disallowance of certain entertainment, etc., has been revised as follows (as modified by the CAA):
(n) 100 percent of meal expenses allowed as deduction
(1) In general:
The amount allowable as a deduction under this chapter for any expense for food or beverages shall not exceed 100 percent of the amount of such expense which would (but for this paragraph) be allowable as a deduction under this chapter.
(2) Exceptions
Paragraph (1) shall not apply to any expense if—
(A) such expense is described in paragraph (2), (3), (4), (7), (8), or (9) of subsection (e),
(B) in the case of an employer who pays or reimburses moving expenses of an employee, such expenses are includible in the income of the employee under section 82, or
(C) such expense is for food or beverages— (i) required by any Federal law to be provided to crew members of a commercial vessel,(ii) provided to crew members of a commercial vessel.
(D) such expense is—
(i) for food or beverages provided by a restaurant, and
(ii) paid or incurred before January 1, 2023.
(3) Special rule for individuals subject to Federal hours of service (superseded by CAA)
In the case of any expenses for food or beverages consumed while away from home (within the meaning of section 162(a)(2)) by an individual during, or incident to, the period of duty subject to the hours of service limitations of the Department of Transportation, paragraph (1) shall be applied by substituting “80 percent” for “50 percent”
Motor Carrier: A motor carrier with an effective Federal tax rate of 10% paying trucker per diem to a driver who is away from home an average 280 nights per year will save with the full deduction for per diem an additional $370 per year in 2021 and 2022.
Owner Operator: An independent owner operator operating one-truck with an effective Federal tax rate of 18% claiming trucker per diem and averaging 280 nights away from home per year will save with the full deduction for per dieman additional $665 per year in 2021 and 2022.
Use our Fleet Per Diem Benefit Calculator to learn how much your fleet can save with Per Diem Plus Fleets
Per Diem Plus FLEETS is a configurable mobile application enterprise platform that automates administration of an IRS-compliant accountable per diem plan for truck drivers and fleets managers. No matter how big or small your company is, Per Diem Plus has a solution for you.
The Per Diem Plus® is the only IRS-compliant mobile application that provides automatic trucker per diem and travel-related expense tracking for drivers, motor carriers and owner operators. Per Diem Plus was designed, developed and is managed in the USA.
Mark is tax counsel for Per Diem Plus. With nearly two decades of experience advising trucking companies on per diem issues, Mark was responsible for defining the Per Diem Plus software logic rules that automatically calculates trucker per diem in accordance with IRS regulations. He also previously served as the consulting per diem tax expert for Omnitracs.
In addition to his time working with Per Diem Plus, Mark works in private practice as an Enrolled Agent at Mark Sullivan Consulting, PLLC specializing in federal tax controversy representation and consulting. He also served as the consulting and expert witness for the Federal Defenders Office and private defense counsel in financial crimes cases in multiple federal district courts. Contact Mark W. Sullivan, EA
Copyright 2021, 2022, 2023 Per Diem Plus, LLC. Per Diem Plus proprietary software is the trademark of Per Diem Plus, LLC.®
Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.
The Biden administration has proposed $2.3 trillion in new taxes in its 2022 budget essentially undoing the significant tax cuts implemented by the 2017 Tax Cuts and Jobs Act. Under Biden's proposal taxes will increase for the 40% of taxpayers that paid income taxes in 2020 in roughly 96% of congressional districts. Residents of the District of Columbia, Massachusetts, Connecticut and New York will experience the largest average tax increases - $1,000 in 2022 alone. Taxpayers with kids living in Mississippi, Alabama, and Oklahoma should expect a tax cut of over $400 in 2022. However, by 2025 (after the next Presidential election) taxpaying residents of every state and the District of Columbia will see a tax increase.
Whether or not your taxes will increase depends on several factors 1) income source, self-employed or W-2 employee 2) the number of qualifying children you have, and 3) the state and congressional district you reside. Click HERE to to use the Tax Foundation interactive map to project tax changes by your state and district.
Arizona taxpayers residing in District 6 (Phoenix) on average earn $126,760 and can expect their taxes to increase $2,247.77. For comparison District 3 (Nogales) residents on average earn only $50,131 and will receive a significant tax cut of $1,407. In fact, the largest tax cuts on average per filer are in majority-Hispanic districts in California, Texas, and Arizona, with tax cuts exceeding $1,500 per filer in 2022. However, this is not a result of carve-out legislation but primarily to the expanded Child Tax Credit, Hispanic population density and predominance of the nuclear, Roman Catholic family in Hispanic culture.1
The 2017 TCJA cut taxes for the majority of Americans. Unfortunately, President Biden believes the 40% of Americans that paid income taxes in 2020 are not paying enough and has proposed $2.3 trillion in new taxes. Whether your income taxes will increase can be projected based your state of residence and congressional district.
The Per Diem Plus® is the only IRS-compliant mobile application that provides automatic trucker per diem and travel-related expense tracking for drivers, motor carriers and owner operators. Per Diem Plus was designed, developed and is managed in the USA.
This article was written by Mark W. Sullivan EA, Tax Counsel for Per Diem Plus, who has over a decade of experience advising trucking companies on per diem issues. Prior to starting a private practice in 1998, Mr. Sullivan was an Internal Revenue Officer with the New York, NY, Saint Louis, MO and Washington, D.C. offices of the Internal Revenue Service. Questions? Contact Mark W. Sullivan, EA.
Copyright 2021 Per Diem Plus, LLC. Per Diem Plus proprietary software is the trademark of Per Diem Plus, LLC.®
Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.
Did you receive a Paycheck Protection Program Loan (PPP) in 2020 to keep your small trucking company from going under? Did you use the loan proceeds for qualifying purposes, like payroll costs, mortgage interest payments, rent, and utilities? The good news is your loan should be forgiven AND it will be exempt from federal taxation. The bad news is that many states do not conform to the federal tax code and will tax them by either treating forgiven loans as taxable income, denying the deduction for expenses paid for using forgiven loans, or both. The Tax Foundation map below and (click HERE to view state-by-state table show states’ tax treatment of forgiven PPP loans.
Fortunately several states that currently tax forgiven PPP loans, including Arizona, Arkansas, Hawaii, Maine, Minnesota, New Hampshire, Virginia, and Wisconsin, bills have been introduced to prevent such taxation.
If you received a PPP loan, and with tax deadlines fast approaching, you should consult with your tax advisor to determine if you will incur a state tax liability for the forgiven loan.
The Per Diem Plus® - Owner Operators is the only IRS-compliant mobile application that provides automatic trucker per diem and travel-related expense tracking for drivers, motor carriers and owner operators. Per Diem Plus was designed, developed and is managed in the USA.
Mark is tax counsel for Per Diem Plus. With nearly two decades of experience advising trucking companies on per diem issues, Mark was responsible for defining the Per Diem Plus software logic rules that automatically calculates trucker per diem in accordance with IRS regulations. He also previously served as the consulting per diem tax expert for Omnitracs.
In addition to his time working with Per Diem Plus, Mark works in private practice as an Enrolled Agent at Mark Sullivan Consulting, PLLC specializing in federal tax controversy representation and consulting. He also served as the consulting and expert witness for the Federal Defenders Office and private defense counsel in financial crimes cases in multiple federal district courts. Contact Mark W. Sullivan, EA
Copyright 2021, 2022 Per Diem Plus, LLC. Per Diem Plus proprietary software is the trademark of Per Diem Plus, LLC.®
Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.
Yes. As a self-employed trucker you cannot do your job via a ZOOM meeting, thus you are eligible for a refundable tax credit under the Families First Act (FFCRA). You may fund the "sick leave" or "family leave" tax credit by using a portion of the 2020 estimated tax payments that were supposed to be paid quarterly. The refundable credit will be claimed on your Form 1040, U.S. Individual Income Tax Return, for the 2020 tax year.
An eligible self-employed individual is defined as an individual who,
Eligible self-employed individuals are allowed an income tax credit to offset their federal self-employment tax for any taxable year equal to their “qualified sick leave equivalent amount” or “qualified family leave equivalent amount.”
The tax credit is calculated by multiplying the number of days you could not work (maximum of 10 days) between April 1 and December 31, 2020 by either:
Average daily self-employment income is an amount equal to the net earnings from self-employment for the taxable year divided by 260. A taxpayer’s net earnings from self-employment are based on the gross income that he or she derives from the taxpayer’s trade or business minus ordinary and necessary trade or business expenses.
Which type of "leave" you qualify for depends on the reason(s) you were unable to work. Those that were prohibited from working can claim up to $511/day but those who were home to care for a family member can only claim up to $200/day.
For an eligible self-employed individual who is unable to work or telework because the individual:
the qualified sick leave equivalent amount is equal to the number of days during the taxable year that the individual cannot perform services in the applicable trade or business for one of the three above reasons, multiplied by the lesser of $511 or 100 percent of the “average daily self-employment income” of the individual for the taxable year.
Example: John was unable to drive due to state-mandated quarantine orders and the absence of loads for 8 days. He had $75,000 or an average of $288/day of self-employment income in 2020.
John can claim the lesser amount of $2,304 as refundable credit under FFCRA on his Form 1040, U.S. Individual Income Tax Return.
For an eligible self-employed individual who is unable to work or telework because the individual:
the qualified family leave equivalent amount is equal to the number of days during the taxable year that the individual cannot perform services in the applicable trade or business for one of the three above reasons, multiplied by the lesser of $200 or 67 percent of the “average daily self-employment income” of the individual for the taxable year.
Example: Mary was unable to drive for 10 days because she was home caring for her husband who had been exposed to COVID. She had $65,000 or an average of $250/day of self-employment income in 2020.
Mary can claim the lesser amount of $1,680 as refundable credit under FFCRA on his Form 1040, U.S. Individual Income Tax Return.
The refundable credits are claimed on the self-employed individual’s Form 1040, U.S. Individual Income Tax Return, tax return for the 2020 tax year. The Families First Act refundable tax credit is not surprisingly complicated, please consult with your tax advisor.
Substantiate the days you were unable to work using either of the following methods:
The Per Diem Plus® - Owner Operators is the only IRS-compliant mobile application that provides automatic trucker per diem and travel-related expense tracking for drivers, motor carriers and owner operators. Per Diem Plus was designed, developed and is managed in the USA.
Mark is tax counsel for Per Diem Plus. With nearly two decades of experience advising trucking companies on per diem issues, Mark was responsible for defining the Per Diem Plus software logic rules that automatically calculates trucker per diem in accordance with IRS regulations. He also previously served as the consulting per diem tax expert for Omnitracs.
In addition to his time working with Per Diem Plus, Mark works in private practice as an Enrolled Agent at Mark Sullivan Consulting, PLLC specializing in federal tax controversy representation and consulting. He also served as the consulting and expert witness for the Federal Defenders Office and private defense counsel in financial crimes cases in multiple federal district courts. Contact Mark W. Sullivan, EA
Copyright 2020-2022 Per Diem Plus, LLC. Per Diem Plus proprietary software is the trademark of Per Diem Plus, LLC.®
Disclaimer: This article is for information purposes only and cannot be cited as precedent or relied upon in a tax dispute before the IRS.
