Daily allowance for drivers increases for the first time in 3 years

The Internal Revenue Service (IRS) said the daily allowance for transport workers will be increased by $ 3 between 2021-22.

The changes come into force on October 1, at the beginning of the federal budget year. The earlier rate was valid from 2018-19.

Steve Pletcher and Kelly Block, partners of Scopelitis, Garvin, Light, Hanson & Feary, stated that “practically many carriers actually take the IRS norm for food and incidental expenses as daily allowances. And it makes sense because as this amount the IRS deemed to be prudent to spend on food and other incidental expenses during working away from home for certain trucking workers.”

A $ 3 increase in daily allowance may seem small. That’s $ 69 for trips to the continental US and up to $ 74 for outside of the continental US. But if the independent owner-operator is 200 days on the road, that’s already $ 600 tax-free compensation. Depending on the driver’s tax rate, $ 600 can be considered taxable compensation between $ 900 and $ 1 000.

Troy Hogan, a partner at the transport consulting company Katz, Sapper & Miller, said that in order to be eligible, a trucker must be on the road for a significant amount of time during a business day: “must be away from tax address for longer than normal business hours.”

But this doesn`t mean that this is a 24-hour rule. Truckers should be away “enough time to make it clear that they won`t complete the trip without sleep or rest.”

Considering that in most cases daily subsistence allowance isn`t taxed, the presentation shows that the issue can be sometimes quite difficult.

If a company pays an employee a reimbursement on expenses that surpass the $ 69 per day norm, it creates risks, Pletcher and Block said in their email. According to them, if payments exceed $ 69, “the IRS may also remove the entire daily subsistence plan from consideration.”