Adlerdriver

Need some more info:
Did you fly a lot while sitting reserve?
What do you get paid for per diem?
Do you fly international or domestic?
If domestic, do you fly to larger cities or mostly smaller locations?

Finally, if you've never itemized before, is that because you don't have other reasons to do so? You're going to need a better reason than a half a year of per diem deductions to make it worthwhile. Do you have a mortgage, family, etc.?

globalexpress

And I think there is some confusion on this thread about "choosing" to itemize.

Everyone gets a choice, per se. You can either take your standard deduction or itemize. Schedule A is used to add up all of your itemized expenses. If your itemized deductions exceed your standard deduction, 99% of the time you will take your itemized deductions as that normally gives you the biggest tax benefit.

Per diem expenses fall under the section of Schedule A that has a 2% AGI floor. So your per diem expenses are going to have to exceed that 2% floor. If you're paying union dues, that usually gets you most of the way there. Throw in some uniform costs and you've likely made your floor.

Anyway, you're going to have to sit down and figure out how many hours you were in all the cities you flew to, then figure out what the company paid you in per diem during that time. Then you're going to have to figure out how much the IRS allows for that city then subtract the two. Then you have to add up the shortfall (assuming there is one) for all the individual cities. You're going to have to do that for each city you flew to.

Is that worth $59 dollars of your time? If you aren't flying much, then the $59 may be more than your tax savings. Remember, this is a deduction and not a credit so you're not getting a dollar for dollar savings. If your marginal tax bracket is 15%, every $100 in deductions saves you $15 (generally speaking). So your per diem shortfall, after reducing it by the DOT employee % (which further decreases the per diem deduction value), would have to be around $800 bucks to break even on the $59 fee. Although that $59 would be deductible to you next year, so maybe a little more than $800 :-)

Cubdrick

Anyone have experience and/or recommendations for EZ Per Diem?

501D22G

Everything globalexpress said was right on the money.

I haven't used Pro per diem or EZ per diem or per diem for dummies, etc, so I can't offer insight there.

But if you are really trying to save $59, and you know how to do basic formulas in microsoft excel (openoffice is a free alternative), you can do your per diem yourself.

Easily.

If you didn't itemize (you took the standard deduction) last year, stop here. If you didn't buy a house, or have a kid, stop here.

If you were born before 1978, have trouble using an iphone, or think computers are scary robots who eat old people's medicine for fuel, stop here.

Otherwise, grab your macbook pro out of your backpack, put on your ipod to a sweet jam, get frosted tips, and rock out a formula.

You will need these for reference.

Pub 463
Pub 529
Pub 1542
Instructions 2106
form 2106
Schedule A
1040

I will use a few examples:

You are a CommutAir FO, you made about $24,600. The difference between what your employer paid you, and what you should have received in reimbursed business expenses, MUST be more than $492 (the magic 2% floor). This should be fairly easy, as they pay you $1.45/hr, so about $35 per diem.
(the 2% floor is actually calculated on your Adjusted Gross Income, AGI, line 37 on your 1040).

Until pub 463 gets published again, the special rates for transportation workers are $59 and $65 per diem, domestic and int'l for M&IE (meals & incidental expenses).

You must prorate the first and last day of a trip by 75% (or prorate according to reasonable business practices). Just use 75% unless you enjoy being audited.

You must only deduct 50% of your business expenses, EXCEPT that taxpayers subject to DOT rest rules can deduct 80%. Since we are all truck drivers, errr pilots, we get to use 80% instead of 50%.

So, on a random 4 day trip you would calculate .75(59) + 59 + 59 + .75(59)
then, take 80%.

So, Commutair should have paid you about $165, but you only received x.

the total x for all your trips is Code L box 12 of your W-2.

So, your mission is to calculate all of your trips, using the domestic or int'l rate for the respective portion of your trip, and then find the difference from what you got paid. Say they only paid you for 72 hours, or about $104. $61 is what you get to deduct. If you did only 10 trips like that, then congratulations, at $610, you already exceeded your 2% floor of $492.

2nd example:

You fly for Fedex, widebody captain, not a great year, you made north of $225,000. You file jointly with your 4th wife, who is a teacher. After you subtract her educator expenses, alimony for the first 3 wives, you get an AGI of about 5 bucks. (kidding)

Okay say your AGI is $200k, to make the math easy. Your floor of 2% is $4000. You do a lot of international, so you are using the $65 number. However, Fedex pays $2.95 / hr per diem, about $71, which is more. So stop right here, you are wasting your time (and your $59 for the per diem software).

The alternative to the flat domestic/int'l DOT rates ($59/$65) are pub 1542, for domestic localities and the DepState's foreign per diem rates. Say you go to china frequently. Depending on the city, you could be owed all the way up to $158!

If you use the DOT rate $59/$65, you must consistently use it. If you use each locality rate (in pub 1542 and DepState's foreign rate chart) then you must consistently use those rates for all localities.

By now you all should get the idea. Use a few formulas and sums in excel to find the answer. If you have surpassed about $4000, then make the deduction. That is what goes into Turbotax, taxact, etc. Use form 2106. The result goes on line 24 on 1040.

As usual, the regular disclaimers apply, blah blah blah, plus I've just come back from an int'l trip of my own and had a few beers. So i probably missed a few important details. Questions, post here in the forum.

Adlerdriver

501D22G,
That's a very good explanation of the method.

The point some of us were trying to make is this: Many of us very familiar with the method, who used it routinely for years found that ProDiem's product produced far better numbers than we were able to calculate on our own. With all the information available to me at Fedex regarding my trips, I could do the calculations you mentioned for last year in less than an hour. They even put the city per diem rate for each layover so I wouldn't even have to go look it up.

It's not about saving the $59 to do the work yourself, it's the fact that $59 buys you a much higher per diem deduction than doing it yourself.

On another note, be careful of using the special rates ($59/$65). Using them is convenient but chances are you're giving up a significant portion of your per diem deduction for that convenience. Domestically, you'll probably be okay if you're not laying over regularly in places like LA, Chicago or New York City. Internationally(especially Europe/Asia), it's rare to find a city that doesn't significantly exceed the special rate (unless you're laying over in a third world country).

FDXLAG

I think 501D22G is actually the guy who runs prodiem and is using a little reverse psyc to drum up business.

I paid $59 dollars (tax deductable, effective price $49), hit two buttons, typed my fdx password, and got an email 36 hours later that said $9,575 deduction of which fred reimbursed me < $6K. It took less time to order then it did for one of my 45 rpm records to play. The return box went from -$875 to plus 970. But you apple fanboys do as you like.

SpeedTaped

I used EZPerdiem yesterday. Very straight forward worked great and fast. I will use it again next year. I just imported the info into Turbo Tax.

captain152

This is my first time using pro-diem. So forgive my ignorance here. Once I get the email back saying how much I should have received... Where exactly do I put that information in TurboTax? I assume that I have to enter how much my company actually paid me somewhere too??

If someone doesn't mind sending me a PM to walk me through this I'd appreciate it. Thanks!!

FDXLAG

For H & R Block:

Go to job related expense. Under job related expenses, meals and entertainment expenses, enter your pro diem number. Were you reimbursed for any of these expenses? Yes ( For us it is coded L on W2). Are you subject to DOT hours of service limits, Yes.

When you have completed the section look at your form 2106 and see if looks right.

501D22G

I don't understand the magical mystery factor in these $59 professional per diem calculators. Okay, so you can put in your password and it pulls the information directly from your employer. Okay, that's cool, big whoop, wanna fight about it?

But really, if you do the math, the result is the result. Where do the "far better numbers" come from? It could only be fudging the first/last day pro-rating method. Are they just using 100%? That's not pro-rating at all. It should be 75% or something reasonable. The "I did it on my own, it was only about 10 bucks, but Pro EZ Fast Super Duper Fun Time Per Diem Calculator said I can deduct OVER 9000! dollars" line i keep reading on here erects my BS flag.

The feedback on this board indicates they stand behind their products and the results in case of an audit, but do you really want to risk an audit to save 15% or 25% on the dollar? (depending on your tax bracket)

I'm curious to hear of more people's experiences with them (the pro per diem products).


For the 2nd quote:
Adler is right, use caution, don't use the flat rate ($59/$65) if you regularly RON at expensive cities (LA, NY, Guangzhou, China, etc). Instead use the locality rates. On the flip side, if you only went to LA once, and regularly go to po-dunk towns, the M&IE rate for that locality might only be $52 (which is lower than the special transportation worker rate of $59).

You must consistently apply the rates.