I am considering a job offer from another company.
I currently have a company truck and gas card.
Other company won’t give me a truck right away but are offering $75 a week vehicle allowance. Gas will run about 40 to 50 bucks a week.
Is this going to screw me tax wise? Will the allowance be taxed as income?
Lots of other good reasons for making the switch, but this seems like a drawback.
Mike
Trust in God, but row away from the rocks.
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Replies
I guess the first clarification to ask about is if you already have a truck that will suffice for you until(if) they provide a company truck?
To me if they pay $75 a week and you have spend $50 of it on gas, that leaves $25 a week for maintenance, insurance, tags, payment, etc.
I don't know about other guys, but $25 a week doesn't even start to cover those expenses. For me, insurance is about $22 a week, tags average out to about $3.70 a week, oil changes are a few bucks a week (I do about 500 miles a week and get it changed every 3,000 miles), payment alone is close to $100 a week. Tires are coming due so thats another $600-700 bucks for maybe 24 months use or another $6.25 a week.
Even if gas is separate from the truck allowance, you'll still fly through the rest of the allowance every month.
Their offering a truck allowance because they know what it really costs to put a truck on the road day in and day out. At $75 a week, they come out ahead - way ahead.
I think they need to give you money based on a mileage log, otherwise it might be considered taxable compensation. I've worked for a couple of outfits that paid mileage on my truck, and I had to turn in logs. A flat rate per week won't cut it.
we get $300 a month plus $150 a month for insurance and 0.40 a mile
My comments were not based strictly on knowledge but on what I observed twice, working at two larger companies, the kind that have lawyers and accountants around to figure this stuff out. Both of them paid based on mileage logs only, no allowances. You can end up with a LOT of dough that way if you drive much. Current IRS rate is 50.5 per mile.
If I were the recipient of any sort of truck money, I would want it based on a log in case I were audited myself. Actually, I AM the recipient of mileage reimbursement--I drive a personally owned truck and my corporation reimburses me for its use based on logged miles. Both the atty and CPA said to do it that way.
It would be interesting to hear from someone who has been audited on this issue.
Not strictly so, because for our work, a truck is a tool used for other things than merely getting there compared to a salesperson who travels from customer to customer. We need to use the truck on the job too.
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Thanks to all who replied, I guess I'll have to research this some more.
The truck in this case is more of a perk than necessity, we rarely carry any material, just tools. I currently have a minivan that I'll have to change insurance from partial driven to daily.
I am hesitant to demand a truck simply because of being the "new guy" and other foremen coping an atitude towards me at a time when I'd be trying to fit in.
This is going to take some thought, I have been where I am at 12 years. Mike
Trust in God, but row away from the rocks.
an allowance is not taxed as income unless it is outrqageously unreasonable - sucdh as paying you 400 a week salary and 500 a week truck allowance and 400 a week tool allowance.
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Piffin,
Look into cafeteria plans.
tool allowances mileage allowances etc. are all untaxed income, saves you from paying social security taxes etc.. on money used for legitimate expenses. So it's to the employers benefit as well as the employees benefit..
SS may not be there when he needs it but the more you pay in (at least in theory) the higher your payouts will be if the system is not bankrupt.
Someone else mentioned the mileage as "business exp", believe it would be employee expense.
IIRC driving home to and from work does not count as business miles.home to office, no $, office to site, $
bobl Volo, non valeo
Baloney detecter WFR
"But when you're a kibbutzer and have no responsibility to decide the facts and apply the law, you can reach any conclusion you want because it doesn't matter." SHG
to Piffen Frenchy etc.- could you elaborate more on that"truck allowance, tool allowance not taxable situation"? Let's say employee currently earns $25/hourassuming employee agrees--- I could actually change rate of pay to say---$20/hourpay plus $2.50/hour tool allowanceplus $2.50/hour truck allowance?
and the tool and truck allowance portions are not taxed for the employee
AND most importantly not subject to Workers Comp ?--------
as a roofer--workers comp makes SS taxes look like chump changethis scenario would seem to fall under the category of" it sounds to good to be true?"
stephen
My understanding is vehicle allowance is an expense to the business- not a wage and therefore, usually paid by separate check. The recipient is obligated to claim the $ on his/her tax return offsetting either actual mileage or depreciation and actual expense.I'm less certain how tool allowances work since I've never paid or received one. I hope someone chimes in.As always best check with your accountant as to what's reasonable and legal both tax and insurance wise, as at some point it could be construed as fraud.Jim
The awful thing is that beauty is mysterious as well as terrible. God and the devil are fighting there, and the battlefield is the heart of man.- Fyodor Dostoyevski
FNbenthayer,
Only the portion of your car use for personal needs needs to be claimed.. If your first stop from leaving the house is business related and not personal use that's the start point.. However if you commute to work and then use your vehicle to run erands etc. for the business those are deductable from the mileage..
The fine print is pretty tricky and there are all sorts of things and rulings etc.. on the subject.. your best source isn't a tax guy unless he's had recent experiance with the IRS. It seems like every year exact rulings varied somewhat.
In my case I simply didn't use my work vehicle for personal use so I got to write off everything.. Even personal use is a little complex.. I think the last ruling I saw was that if you used your vehicle to carry something home, groceries, material etc.. on your way home from work it was persoanl use if on the other hand you picked up something personal during the day as part of a ruetine stop and carried it with you it was allowable.. My take is that if you made other business related stops after you picked up something personal the whole trip could be claimed..
That is pretty much all as you outlined it. Any accountant can detail a cafeteria plan for you. There can be other allowances, such as housing for migrants or preachers, uniforms for nurses and UPS delivery persons, IT allowance for those in tech who work from home, whatever is necessary and job attached.They see it this way - you could hire the person and pay X dollars an hour and then provide non-taxable benefits such as these and health insurance dierectly. Like - you could buy a company truck fleet and allow your primary people to take them home. Or you can provide a truck allowance and let them deal with all the headaches that go with vehicle ownership.remember out discussion on tools? You can buy them the tools and then they lose them or don't take care of them. But when they buy the tools themselves, they are more proud of them and take care of them. your tool allowance makes that possible.The one part of your Q I am less certain of is whether you can back out and pay less and substitute the benefits package instead of wages. There may be a rule against that. When I have instituted it or seen it added to a company pay package, it was instead of a raise that year. It also must be available to every employee, not just select ones, I think.
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Hazlett
You need to get details from a good tax person. All I know is I took home more with a cafeteria plan and less income than I did without one.. MY boss wasn't a person who enjoyed paying any more taxes than he had too. So it clearly was worth it to him since there is some adminstration involvement with it..
There are a lot of things that can be in that cafeteria plan.. Day care, medical, car allowance, tool expense etc.. etc. etc..
I think I'd much rather get paid a set amount per mile according to the log, that a straight fee each week. I've never had a vehicle supplied for me same goers with tools. This is something that is part of the trade and area personal thing. At least to me.ML
Suppose you were only driving the rig a hundred miles a week.
At the mileage rate, you only take down say fifty bucks. The straight allowance looks better then.But if you are driving a thousand miles a week, darn right you want the mileage rate!
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MSLiechty
Taxes are a subject I leave to the pros.. and not all pros are good.. The best are those who have had recent experience working for the IRS. (and not in just a clerical position either)..
All I can tell you is that before I found my tax person I was paying the same percentage of income most others pay.. Oh I tried the computer programs,, H&R Block and the other tax preparers. I did one by myself and actually found more deductions than the tax preparer did. I think that year I was paying something like 35% of my income in federal taxes, plus another 18% to the state..
One of the guys I worked with told me I was stupid.. he gave me his tax guy.. I wound up paying just 2% and 3% to the state..
I was terrified of an aduit but he kept assuring me that everything was legitimate..
Now 25 years later I take his numbers without a qualm.. Not once has anything been questioned. He's a real stickler for documentation and proof but as long as I have legitimate deductions it's never been a problem..
Been down that road, and have been through an audit. Won't even consider doing taxes myself now. My current employer allows me to fill up at work as long as I own a Diesel truck. I figure this saves me $450.00/ month and the Dodge 3/4 ton 4x4 CTD is much nicer than what i was driving. Making the payment is really a no brainer for me, but free fuel is on the line.ML
MSLiechty
I've been aduited once.. everything as prepared by a professional tax preparer and I had full documentation covering everything..
They called me in and challenged a claim of a bad debt.. Since I had full court approved documentation and everything else was well documented as well I thought I was covered..
The aduiter looked at me and said well let's go back to last years return then,, do you have the documentation for that? "Gulp, ah no, but I'm sure I do back on base." Ok bring it and the returns for the last 7 years.
We'll find something to disallow.
Long pause, or you can settle right now, write me a check for $500.00 and we'll call it good.. I don't have $500.00
Well how much do you have?
I showed him my check book and I think my balance was like $46.00
OK make it for $46.00 I'm feeling generous..
I wrote the check and knew I'd been screwed but I wasn't about to fight the IRS..
Ouch.. That no good. Mine cost me a couple thousand in extra's They thought was due them. One more reason why we need a "FAIR" taxML
MSLiechty
MY idea of a fair tax is one paid upon purchase of anything.. Don't want to pay taxes? don't buy anything!Eliminate income taxes completely put a national sales tax on anything sold.. (no exceptions!)
If you buy anything be it lunch or a business.. Stock or bubble gum there is a federal sales tax collected..
The rich would really pay the most taxes, the poor pay the least and you wouldn't need to ever fill out another tax form..
Yep Thats the best idea I've heard
Make it a consumption tax.
Abolish the IRS.
Get rid of all write offs etc...ML
I don't agree that the rich would pay the most. The basic stuff is the same price for all and thats where most of my money goes.
Sure the next BMW will have more tax content than the KIA, but thats a every 2 - 3 years type purchase.
USAnigel
Please give it some additional thought.. A sales tax on everything! That includes stocks, bonds or buying General motors. The very rich don't spend as much proportionally on food clothing or shelter as the middleclass and poor do, However they do buy stocks bonds and other investments. They don't let their money just sit around and be eaten by inflation..
If Ford Motor company buys steel to stamp a fender out they pay a tax on that (as well as the presses etc.. (no exemptions!) However, It would be in their interest to make as much stuff as possible rather than buying componants (some of which are imported) That would keep jobs here..
Finally the simple beauty of such a plan. No paperwork, no tax forms, simple to police, fair, understandable. and not open to any shinanagains..
Sounds good, except guys like my ex-wife's first husband.
He owns a manufacturing jewlery store. Barters for everything he can.
New car for the teenager: trade a tennis bracelet for a 69 Mustang, with a bad engine; then trade ear rings for the mechanics girl-friend, for a new engine. Both of which are made up from "floor sweepings", and diamonds "broken" or "chipped" during setting.
New sprinkler system for the yard, diamond posts for the landscapers wife.
jigs-n-fixtures,
I don't suppose it would surprise you that he's breaking the law.. barter isn't immune from taxes. There are whole chapters on it in the IRS manual..
Talk to any tax guy and he'll give you the outline..
Besides, by evading taxes he's putting an additional burden on you.(and every other tax payer who pays his fair share) If you know these things to be a fact and not just rumor you can turn him in and get a reward of a certain percentage of the amount recovered..
Sure, I could do that. But then he is in jail, not making his $1200 a month child support for the four kids she had with him, and she can't make the house payment.
Which leaves her, those four kids (who I still am close to), and the daughter I have with her without a place to stay.
Jigs-n-fixtures
The IRS puts people in jail only as a last resort. They want money, not prisoners..
I understand your reluctance to fink on someone. we're trained that's not a good thing to do.. I accept that.. on the other hand it's not nice to cheat on your taxes either. In the end I guess it's up to you.. as for me I won't take part in those barter systems in part because it leaves me holding the bag of taxes due and tempting as it would be to save the taxes I have to recall the risk I'm taking and I've long ago decided that cheating isn't something that I want to do..
Things like that are where you need knowledge and a representive.For instance, they can't go back but thirtreen years unless they find something wrong in your current year, then if they find something in those three, then they can go back seven.
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Piffin,
Probably true, but I felt I got off lucky. I'm sure a tax lawyer would have cost me more! Besides this happened back in the early 70's
I was gonna post the same answer till I saw your response.
I figured Frenchy woulda known that!
Should told the auditor to go pound sand.
Wow, frenchy has people.
"Welcome to my world"
When you are delivering materials or tools to the job, it is not mere trnsportation.It also makes a difference whether you are an employee or not. It is perfectly legitimate for a company to pay a transportation allowance that is reasonable under a cafeteria plan. That is an expense for the company but not a taxable event for the employeeIt is also reasonable for that company to pay based on mileage instead.And it is legitimate for the OP to keep a mileage log, declare the allowance as income and then deduct the rate for actual mileage if his mileage rate would have been more than the allowance paidIn general, an employee not booking too many miles would be better off just taking the allowance and not declaring it.
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Why should I look into them? I have used them to pay people and have been paid under them in three other employments myself. I already know them
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Piffin,
Congradulations, it seems not everybody knows about them and the benefits they offer.. I'm sorry if it was an unwarrented offer of help..
I'm not a tax account, but you might be better off using your personal car and keeping a milage log. Then when you do, you might be able to write off all the work miles, at the prevailing IRS per mile reimbursement, as a business expense.
I defer to what Piffin said a couple of posts before as to whether the IRS considers a truck as a tool for contractors. I know that I have a company car and I'm turning it in b/c I burned me on my taxes.
The personal usage of the vehicle, if any, could be taxable under current IRS rules.
Barney
Its not the destination, but the integrity of the journey.
Thanks for the tip, I'll be asking around. Mike
Trust in God, but row away from the rocks.
Did some more thinking about this last night after reading the other posts. Some other things to consider:
1) The milage from home to the "office" is not considered work miles. They are personal and therefore could be taxable.
2) The milage allowance could be subject to additional taxes. I believe, but then again I'm not a tax account, that the allowance is viewed as an employee benefit and t herefore taxable. So, the $75/wk could come out to about $40/wk after taxes. For example, my employer provides a $350/mnth vehicle allowance if you use your own car. Then you are able to get reimbursed $0.11/mile for the business miles. Here's the catch, the $350 goes in to your pay check b/c its a benefit and you only bring home $250/mnth after taxes.
Both of the above are reasons, in addition to me being taxed on my company car b/c of any personal miles, why I'm giving it back. With the $0.55/mile IRS allowance for business miles you make out way better keeping a milage log.
Just my thoughts.
Barney<!----><!----><!---->
<!----> <!---->
Its not the destination, but the integrity of the journey.<!----><!---->
Barney,
Please talk to someone who really knows what they are speaking about. I know I can deduct all my miles because of the nature of my work. Only personal miles are exempt and if you go into an office you are correct but if your first call is for business you can deduct everything from that point on.. there are even exceptions and exemptions to that rule.
That's why you really need someone who knows not only the code but in addition all the rulings, exemptions and exclusions that apply. That's the really difficult part!Virtually anybody can read the rules and guess as to the real meaning and intent but you need someone who is sharp enough to have read the recent rullings and exemptions that apply.. there are over 22,000 pages in the tax code but that's a tiny fraction of the rulings, judgements, and exemptions that apply. If you don't know those you will pass up deductions, legitimate deductions, that apply to you.
I don't know because I'm not in that sort of position but I would believe that a carpenter who goes to a differant site frequently might be exempt from the office call requirement.. Or he may be able to stop at one place say a local hardware store or something else business related and claim mileage from that point on..
You darn sure won't get that from a computer program. Nor will you get it from the average tax preparer. You need someone who has worked for the IRS in something other than a clerical position.. Preferabaly someone in enforcement.
I agree completely with you. This is a job for a license CPA to figure out that has knowledge of the IRS's antiquated tax code.
I'm simply realing my experience with my job and how it is handled here.
As I said in my first response, the codes may apply differently to contractors than other people.
Barney<!----><!----><!---->
<!----> <!---->
Its not the destination, but the integrity of the journey.<!----><!---->
Barney,
a CPA isn't who you need. Most have little more than arudamentary knowledge of the tax code.. The real wealth in tax deductions comes from those who work with just taxes day in and day out..Not only works with taxes,, but is involved with rulings and judgments etc..
The stuff that makes the differance to determine if a legal deduction is taken or not..
To me,
I drive a hard bargain every time I buy a truck. And, I never pay more than $300 a month.
$300 /4.3 ( the number of "weeks" in a month, child support will teach you that)= $69 a week. then add in gas and upkeep?
Even if ti gets used 50% for work, your out of pocket for it.
But as an employee? You have to look at the big picture, not just one small piece.
What are ya giving and what are you taking?
Does the amount include gas?
Do you know that using a personal vehicle for work can open up some insurance issues?
If it was me, I wouldn't accept any less than an amount equal to 1/2 of the payments, insurance and registration, plus a gas card and 1/2 of major maintenance expenses.
Keep track of the miles driven, claim it on your taxes, and deduct the allowance you have been paid. If the allownace total exceeds the mileage deduction, you pay taxes on that. You will not be screwed.
If you are 1099'd on the allowance, you might be able to get into some depreciation on your truck.
Miles from "home" to "the shop" must be deducted from the daily total. If you drive straight to the site, deduct an amount equal to the total miles from home to the shop.
Please consult a tax pro.
Is there a reason for the company truck delay at the potential new place?
Do the other reasons stand alone in making a decision to switch employers?
I have learned a lot from this thread about vehicle allowances, which was my goal.
The vehicle will be used primarily as a commuter, as is my current provided truck.
I have never claimed any mileage in the past, I have a healthy fear of the IRS since a skirmish with them in the 80's. ; ^ )
Is there a reason for the company truck delay at the potential new place?
Do the other reasons stand alone in making a decision to switch employers?
I have only met these guys for lunch once (they paid me for a full day) and the superintendent was hesitant when I talked about a truck, while the owner was perhaps more willing. At least that was my take on it.
I was contacted by them, not the other way around. They are an established commercial drywall/door co. poised to jump into big work, and they will need a couple of guys like me. While not unhappy where I am, my current co. has been trying to make the same leap but can't seem to pull it off.
With a good decade left in my career, I am interested in doing some more large projects and these guys are going there. I know an estimator there and their growth has been healthy and steady.
I plan on meeting with them next week. One thing I am considering is asking for a large down on a truck at a fleet price and going with a vehicle allowance. Hey, all they can say is no.
Mike
Trust in God, but row away from the rocks.
That's a tough call to make.
They may not have the capital to invest in vehicles now... or they may be hesitant to use the cash stash in case the expansion flops. Hopefully you will not buy a new vehicle for the new job and be stuck with the payments if the job goes away.
That's the problem with you buying a vehicle and relying on the company reimbursement scheme.
If the intent is for you to run big work, then I would think the tools and materials will be delivered... so maybe a company truck isn't needed.
If it was me, I wouldn't leave a job I was happy with unless the company looking to hire me took some of the risk, too. That means there better be a truck, a gas card and a substantial pay increase (on the check- no bone-us c r a p ) waiting for me. Otherwise, what's the point- especially for a measly $75 a week that probably has to cover fuel, too?
wow, c r a p is banned too?
Edited 4/19/2008 1:55 pm ET by danski0224
One of the reasons I am considering the change is the economy. My current employer seems pretty vulnerable to downswings ( a lot of condo projects), and when it is slow I end up hanging rock along with everyone else.
The other company is more varied and into much larger projects. If I get a large job I can be on a site a year easy. Obviously I have a lot to consider and negotiate. How the next couple of weeks play out is gonna be interesting. Mike
Trust in God, but row away from the rocks.
Where do you live, 1975? $50 bucks wouldnt get me to work. Right now i'm spending about $100/ week on gas. I just put in $50 today and it got me 14 gallons.
I live in a very central location. Longest commute would be 25 miles one way, more likely 15 to San Francisco. Just paid $3.92 a gallon today!
Maybe my estimate is a little optimistic. Mike
Trust in God, but row away from the rocks.
Must be nice to have such a short commute. I srewed up big. I work mainly on the east side but we got a good deal on a house on the west side. Now instead of having a 10 mile trip to the area I contract in its more like 30 miles one way.
Guess it doesnt matter too much though, if things get any slower I wont need gas at all.