Thursday, February 04, 2021
Friday, January 29, 2021
House Bill to Clarify Minimum Wage and Overtime Calculations - HB1227
Some great information we wanted to pass along regarding an issue trucking companies are facing. If you click on the HB1227 you can open the bill to read over.
Sen.
English is co-sponsoring a bill in the 93rd Arkansas Legislative
Session that ATA has drafted. HB1227, which was introduced
today, aims to clarify minimum wage and overtime calculation questions for
commercial truck drivers. This simple clarification could potentially save
trucking companies from time-consuming and costly employment litigation.
Friday, December 18, 2020
Bipartisan Emergency COVID Relief Act of 2020 - Paycheck Protection Program
By Richard L. Bell, CPA
PPP Summary Topic (see linked Bipartisan Emergency COVID Relief Act of 2020 - Framework Summary)
The Bill would allow for a second round of PPP loans to certain small businesses, with fewer than 300 employees, who had a 30% revenue loss in any quarter of 2020.
Contrary to the recent IRS Notice and Rulings that would disallow the deductibility of PPP paid expenses with PPP loan proceeds that are forgiven, thus making the loan forgiveness totally taxable.
This Bill would allow full tax deductibility of business expenses paid with PPP funds, and would allow for the forgiveness of the PPP loan proceeds as well.
If you have any questions on this subject please contact me Richard.bell@bellandcompany.net.
Wednesday, May 18, 2016
Driver Per Diem to Pay or Not to Pay that is the Question
Arkansas Business Article
By allocating a portion of a driver's pay, you eliminate the payroll taxes on that portion and also the federal and state income taxes on that portion for the driver. You also reduce the amount of worker’s compensation premium that you pay. But be careful in this, because most work comp policies have a limit on how much per diem you can exclude from pay for work comp premium calculation purposes. Although 20 percent of the per diem paid is not deductible for the company, the savings on payroll taxes and work comp premium will exceed the tax on the 20 percent.
By Day or Mile?
There are a lot of questions on the best way to manage per diem pay for truck drivers these days. Per diem, in this case, is a non-taxable reimbursement for meals and incidentals as it pertains to the trucking industry. Other types of per diem also include a lodging rate, which is based on the locale of the travel.
By Day or Mile?
Paying per diem by the day is a more accurate method of payment. It eliminates the need for testing the per diem on a periodic basis which is required to be performed if you pay by the mile.
If you are paying by the mile and you are not testing your per diem you need to start. Should you be subjected to an audit that is one of the first things the auditors will want to review. If you are paying by the mile there could be a chance, depending on the rate, that you could exceed the daily allowance, which is currently $63 per day. On any departure or arrival day you can pay up to 75 percent of the daily allowance. So in an ideal situation, when the driver leaves on Monday at 8 a.m. and returns Friday at 8 p.m., you can pay the driver two days at 75 percent of the daily rate and three days at 100 percent of the daily rate.
The payment of the per diem pertains to the amount of time the driver is away from his or her “tax home.” Also, by paying by the mile, you could lose out on the maximum savings you can receive by paying the per diem. For example, if you pay per diem at .08 cents per mile, your driver may go 600 miles in a 24-hour period (obviously an almost perfect scenario), that amounts to only $48. Technically the driver should get $63, so you have missed out on the maximum savings of paying the per diem. By paying by the day, you calculate the per diem at the end of the trip and that means no need to test it periodically.
Tuesday, September 29, 2015
Fiscal Year 2016 Travel Per Diem Rates Now Available
Documenting business travel expenses causes administrative headaches for employers and employees alike. Typically, employees are required to collect receipts as they travel, noting the time, place and business purpose of each expenditure. They then must submit monthly expense reports that are subject to approval of their supervisors. Sometimes, administrative delays occur if documentation is incomplete or a supervisor questions the business purpose (or reasonableness) of an item. Employers must hold on to all of this documentation for several years in case the IRS questions business travel deductions. Isn't there any easier way to reimburse workers for their travel costs?
Alternative Substantiation Methods
Fortunately, the IRS offers simpler alternatives that may be worthwhile for some companies. Instead of reimbursing employees for their actual expenses for lodging, meals and incidentals while traveling, employers may pay them a per diem amount, based on IRS-approved rates that vary from locality to locality.
If your company uses per diem rates, employees don't have to meet the usual recordkeeping rules required by law. Receipts of expenses generally aren't required under the per diem method. Instead, the employer simply pays the specified allowance to employees, although they still must substantiate the time, place and business purpose of the travel. Per diem reimbursements generally aren't subject to income or payroll tax withholding or reported on the employee's Form W-2.
Important note: Per diem rates can't be paid to individuals who own 10% or more of the business.
Under the "high-low method," the IRS establishes an annual flat rate for certain areas with higher costs of living. All the locations within the continental United States that aren't listed as "high-cost" automatically fall into the low-cost category. The high-low method may be used in lieu of the specific per diem rates for business destinations. Examples of high-cost areas include San Francisco, Boston and Washington, D.C. (See the chart below for a complete list by state.)
Under some circumstances — for example, if an employer provides lodging or pays the hotel directly — employees may receive a per diem reimbursement only for their meals and incidental expenses. The IRS also provides a $5 incidental-expenses-only rate for employees who don't pay or incur meal expenses for a calendar day (or partial day) of travel.
Recent Updates for 2016
The IRS recently updated the per diem rates for business travel for fiscal year 2016, which starts on October 1, 2015. Under the high-low method, the per diem rate for all high-cost areas within the continental United States is $275 for post-September 30, 2015, travel (consisting of $207 for lodging and $68 for meals and incidental expenses). For all other areas within the continental United States, the per diem rate is $185 for post-September 30, 2015, travel (consisting of $128 for lodging and $57 for meals and incidental expenses). Compared to the prior simplified per diems, the high-cost area per diem has increased $16, and the low-cost area per diem has increased $13.
The following costs aren't included in incidental expenses:
The IRS also modified the list of high-cost areas for post-September 30 travel. The following localities have been added to the high-cost list:
Companies that use the high-low method for an employee must continue to use it for all reimbursement of business travel expenses within the continental United States during the calendar year. The company may use any permissible method to reimburse that employee for any travel outside the continental United States, however.
For travel in the last three months of a calendar year, employers must continue to use the same method (per diem method or high-low method) for an employee as they used during the first nine months of the calendar year. Also, employers may use either:
1. The rates and high-cost localities in effect for the first nine months of the calendar year or
2. The updated rates and high-cost localities in effect for the last three months of the calendar year, as long as they use the same rates and localities consistently for all employees reimbursed under the high-low method.
Company Deductions
In terms of deducting amounts reimbursed to employees on the company's tax return, employers must treat meals and incidental expenses as a food and beverage expense that's subject to the 50% deduction limit on meal expenses. For certain types of employees — such as air transport workers, interstate truckers and bus drivers — the percentage is 80% for food and beverage expenses related to a period of duty subject to the hours-of-service limits of the U.S. Department of Transportation.
Example: A company reimburses its marketing manager for attending a July trade show in Chicago based on the $275 high-cost per diem. It may deduct $241 ($207 for lodging plus $34 for half of the meals and incidental expense allowance).
Contact a Tax Pro
IRS auditors often target business travel expenses. So, detailed recordkeeping is imperative. Per diem substantiation methods may simplify your recordkeeping requirements and minimize IRS scrutiny. Contact your tax adviser to determine if it makes sense for your company to use per diem rates to reimburse employees' business travel expenses.
Alternative Substantiation Methods
Fortunately, the IRS offers simpler alternatives that may be worthwhile for some companies. Instead of reimbursing employees for their actual expenses for lodging, meals and incidentals while traveling, employers may pay them a per diem amount, based on IRS-approved rates that vary from locality to locality.
If your company uses per diem rates, employees don't have to meet the usual recordkeeping rules required by law. Receipts of expenses generally aren't required under the per diem method. Instead, the employer simply pays the specified allowance to employees, although they still must substantiate the time, place and business purpose of the travel. Per diem reimbursements generally aren't subject to income or payroll tax withholding or reported on the employee's Form W-2.
Important note: Per diem rates can't be paid to individuals who own 10% or more of the business.
Under the "high-low method," the IRS establishes an annual flat rate for certain areas with higher costs of living. All the locations within the continental United States that aren't listed as "high-cost" automatically fall into the low-cost category. The high-low method may be used in lieu of the specific per diem rates for business destinations. Examples of high-cost areas include San Francisco, Boston and Washington, D.C. (See the chart below for a complete list by state.)
Under some circumstances — for example, if an employer provides lodging or pays the hotel directly — employees may receive a per diem reimbursement only for their meals and incidental expenses. The IRS also provides a $5 incidental-expenses-only rate for employees who don't pay or incur meal expenses for a calendar day (or partial day) of travel.
Recent Updates for 2016
The IRS recently updated the per diem rates for business travel for fiscal year 2016, which starts on October 1, 2015. Under the high-low method, the per diem rate for all high-cost areas within the continental United States is $275 for post-September 30, 2015, travel (consisting of $207 for lodging and $68 for meals and incidental expenses). For all other areas within the continental United States, the per diem rate is $185 for post-September 30, 2015, travel (consisting of $128 for lodging and $57 for meals and incidental expenses). Compared to the prior simplified per diems, the high-cost area per diem has increased $16, and the low-cost area per diem has increased $13.
The following costs aren't included in incidental expenses:
- Transportation costs between places of lodging or business and places where meals are taken, and
- Mailing costs of filing travel vouchers and paying employer-sponsored charge card billings.
The IRS also modified the list of high-cost areas for post-September 30 travel. The following localities have been added to the high-cost list:
- Mammoth Lakes, Calif.,
- Grand Lake, Colo.,
- Silverthorne/Breckenridge, Colo.,
- Traverse City/Leland, Mich.,
- Hershey, Pa., and
- Wallops Island, Va.
- Sedona, Ariz.,
- Santa Cruz, Calif.,
- New Orleans, La.,
- Baltimore City, Md.,
- Cambridge/St. Michaels, Md.,
- Glendive/Sidney, Mont.,
- Conway, N.H.,
- Glens Falls, N.Y.,
- Tarrytown/White Plains/New Rochelle, N.Y.,
- Kill Devil, N.C., and
- Williston, N.C.
- Napa, Calif.,
- Telluride, Colo.,
- Miami, Fla.,
- Martha's Vineyard, Mass.,
- Nantucket, Mass.,
- Jamestown/Middletown/Newport, R.I.,
- Charleston, S.C., and
- Jackson/Pinedale, Wyo.
Companies that use the high-low method for an employee must continue to use it for all reimbursement of business travel expenses within the continental United States during the calendar year. The company may use any permissible method to reimburse that employee for any travel outside the continental United States, however.
For travel in the last three months of a calendar year, employers must continue to use the same method (per diem method or high-low method) for an employee as they used during the first nine months of the calendar year. Also, employers may use either:
1. The rates and high-cost localities in effect for the first nine months of the calendar year or
2. The updated rates and high-cost localities in effect for the last three months of the calendar year, as long as they use the same rates and localities consistently for all employees reimbursed under the high-low method.
Company Deductions
In terms of deducting amounts reimbursed to employees on the company's tax return, employers must treat meals and incidental expenses as a food and beverage expense that's subject to the 50% deduction limit on meal expenses. For certain types of employees — such as air transport workers, interstate truckers and bus drivers — the percentage is 80% for food and beverage expenses related to a period of duty subject to the hours-of-service limits of the U.S. Department of Transportation.
Example: A company reimburses its marketing manager for attending a July trade show in Chicago based on the $275 high-cost per diem. It may deduct $241 ($207 for lodging plus $34 for half of the meals and incidental expense allowance).
Contact a Tax Pro
IRS auditors often target business travel expenses. So, detailed recordkeeping is imperative. Per diem substantiation methods may simplify your recordkeeping requirements and minimize IRS scrutiny. Contact your tax adviser to determine if it makes sense for your company to use per diem rates to reimburse employees' business travel expenses.
The High-Cost Area List for 2016
State
|
Key City
|
| California | Mammoth Lakes (December 1-February 29) |
| Monterey (July 1-August 31) | |
| Napa (October 1-October 31; May 1-September 30) | |
| San Francisco | |
| San Mateo/Foster City/Belmont | |
| Santa Barbara | |
| Santa Monica | |
| Sunnyvale/Palo Alto/San Jose | |
| Colorado | Aspen (December 1-March 31; June 1-August 31) |
| Denver/Aurora | |
| Grand Lake (December 1-March 31) | |
| Silverthorne/Breckenridge (December 1-March 31) | |
| Steamboat Springs (December 1-March 31) | |
| Telluride (December 1-March 31; June 1-August 31) | |
| Vail (December 1-March 31; July 1-August 31) | |
| District of Columbia | Washington, D.C. |
| Florida | Boca Raton/Delray Beach/Jupiter (January 1-April 30) |
| Fort Lauderdale (January 1-March 31) | |
| Fort Walton Beach/DeFuniak Springs (June 1-July 31) | |
| Key West | |
| Miami (December 1-March 31) | |
| Naples (January 1-April 30) | |
| Illinois | Chicago (October 1-November 30; March 1-September 30) |
| Maine | Bar Harbor (July 1-August 31) |
| Maryland | Ocean City (June 1-August 31) |
| Massachusetts | Boston/Cambridge |
| Falmouth (July 1-August 31) | |
| Martha's Vineyard (June 1-September 30) | |
| Nantucket (October 1-December 31; June 1-September 30) | |
| Michigan | Traverse City/Leland (July 1-August 31) |
| New York | Lake Placid (July 1-August 31) |
| New York City | |
| Saratoga Springs/Schenectady (July 1-August 31) | |
| Pennsylvania | Hershey (June 1-August 31) |
| Philadelphia (October 1-November 30; March 1-June 30; September 1-September 30) | |
| Rhode Island | Jamestown/Middletown/Newport (June 1-August 31) |
| South Carolina | Charleston (October1-November 30; March 1-September 30) |
| Texas | Midland |
| Utah | Park City (December 1-March 31) |
| Virginia | Virginia Beach (June 1-August 31) |
| Wallops Island (July 1-August 31) | |
| Washington | Seattle |
| Wyoming | Jackson/Pinedale (June 1-September 30) |
— Source: IRS
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