Lack of documentation dooms trucker’s per diem tax claim

An employee truck driver found out the hard way what is needed to deduct certain business expenses in tax returns, including strict requirements for per diem for meals.

A U.S. Tax Court recently affirmed a Commissioner of Internal Revenue decision denying Gary Thomas, a truck driver for Ryder, claimed unreimbursed business expenses. The court found that Thomas, a wage-earning employee driver, was either reimbursed for various expenses or failed to provide proper documentation for other claims such as a meal per diem.

During the relevant time, Thomas hauled golf carts for Ryder in 2016 and 2017. He was compensated for miles driven as well as detention time and layovers (time spent overnight while on the road). Like most truckers, Thomas would incur business expenses like tolls, weigh scales and lodging. He would also have to pay for meals while away from home.

Part of Thomas’ compensation package with Ryder included reimbursements for business expenses. In fact, Ryder payroll records revealed that Thomas was reimbursed for “Non-Taxable Payments” for a variety of items, including “ReimToll” (reimbursement for tolls), “ReimLodg” (lodging) and “NT Allow” (non-taxable allowance).

According to court documents, Thomas filed his tax return for 2016 late in 2019. The return preparer included unreimbursed business expenses. That included expenses related to a per diem, including meals and entertainment.

In February 2022, the IRS commissioner denied Thomas’ claimed unreimbursed business expenses. Instead, the truck driver was allowed the statutory standard deduction. Thomas filed a petition challenging the denial.

Proper documentation for employee per diem

A U.S. Tax Court ultimately sided with the commissioner, finding that Thomas was reimbursed for certain business expenses and lacked the required documentation necessary for employees to claim per diem deductions.

At trial, Thomas alleged Ryder wrongly reported expense reimbursement as taxable if he was reimbursed at all. Further, Thomas’ attorney alleged during closing arguments that Thomas was entitled to claim a deduction for per diem for meals.

Regarding reimbursement for business expenses, the court looked at Ryder’s payroll records and Thomas’ manual log of expenses. The two nearly mirrored each other, both showing the same number of miles paid, as well as identical instances of detention time, layovers, weigh scales and allowance. Consequently, the court ruled that Thomas was reimbursed and that such reimbursements were not treated as taxable.

Per diem deductions were not as well-documented, and that is what ultimately doomed Thomas’ claims.

A taxpayer can deduct ordinary and necessary expenses incurred in the trade or business of being an employee. Known as the Cohan rule, if someone can prove an expense incurred but does not know the exact amount, the commissioner may estimate the amount.

However, the Cohan rule does not apply to section 274(d), which requires a stricter level of proof for travel expenses, including meals and entertainment. Required documentation includes:

• Amount of the expense
• Time and place of travel
• Business purpose of expense
• Business relationship to the taxpayer of the person receiving the benefit

To meet those requirements, a taxpayer must maintain a log and documentary evidence, including receipts and paid bills. Other than his own handwritten log, Thomas provided no other evidence related to per diem costs like meals. Without the required documentation, the driver was denied those claims.

In addition to the documentation requirements, a taxpayer must take additional steps to prove entitlement to deductions for unreimbursed employee expenses. In this case, Thomas needed to produce evidence of Ryder’s reimbursement policy and show that he sought but did not receive reimbursement. Thomas did not provide the court with any record of Ryder’s employee reimbursement policy.

Legislation to restore per diem for employee truck drivers

Per diem expenses for employee drivers were eliminated several years ago, but a bill in Congress could give company truckers back that tax deduction.

Employee truck drivers used to be able to deduct per diem expenses. However, the Tax Cuts and Jobs Act of 2017 removed that privilege. Since then, company drivers have lost thousands of dollars a year in write-offs.

Last July, Rep. Brendan Boyle, D-Pa., introduced the Tax Fairness for Workers Act. In addition to allowing workers to deduct common employment expenses (e.g. travel and uniform costs), the bill also reinstates the per diem tax deduction for employee truck drivers. Sen. Robert Casey, D-Pa., introduced an identical bill in the Senate.

As of Nov. 6, the Tax Fairness for Workers Act has more than 200 co-sponsors, all but eight of which are Democrats. The Senate version has 40 co-sponsors with no Republican support.

The Owner-Operator Independent Drivers Association, which advocates for the rights of all truck drivers, supports the Tax Fairness for Workers Act.

“The elimination of the per diem for company drivers has unfortunately increased the tax exposure for many hard-working Americans who make their living behind the wheel of a truck,” OOIDA President Todd Spencer wrote in 2019.

Truck drivers can go to FightingForTruckers.com to learn more about the Tax Fairness for Workers Act and to contact their lawmakers about the bill. LL

Land Line Senior Editor Mark Schremmer contributed to this story.