Truck drivers are on the road and focused on driving. They do not have access to an organized office or have time to stop and process paperwork. So they are an easier target than some other types of taxpayers. This is why truck drivers are frequently targeted by IRS auditors.
Truck drivers also earn above-average pay and they often fail to keep any records. Their audit exposure is also higher given that they incur expenses that are harder to substantiate.
Mileage and meal expenses are the most common tax deductions that the IRS challenges for truck drivers on audit. Our tax laws include special substantiation rules that apply for these expenses. The consequence of not keeping records is that the IRS will disallow the tax deductions. The per diem rates can help avoid this result.
The court recently addressed this in McGowan v. Commissioner, T.C. Memo. 2009-172. This case involves mileage and meal expenses deducted by a pilot escort driver for oversize load trucks.
- 1 Facts & Procedural History
- 2 Mileage Deductions for Truck Drivers
- 3 Can Truck Drivers Write Off Mileage?
- 4 Truck Drivers Who Use Passenger Vehicles
- 5 Meal & Entertainment Expenses
- 6 Over the Road Truck Driver Meal Deductions
- 7 Standard Per Diem Rate for Truck Drivers
- 8 How to Calculate Per Diem for Truck Drivers?
- 9 How much can truck drivers deduct for meals?
- 10 The Takeaway
Facts & Procedural History
Mr. McGowan worked for Servco Oil and Standard Oil of Connecticut as a truck driver.
In addition, Mr. McGowan worked for William J. Loosemore, Jr. and Safe-Way Pilot Car Service (Safe-Way) as a pilot vehicle escort for wide and/or oversize load trucks. Mr. McGowan used his own automobile in performing these tasks.
Mr. McGowan was issued Forms W-2 for his truck driving activities and Forms 1099-MISC for his pilot vehicle escort activities.
Mr. McGowan did not file federal income tax returns for 2002-2004.
The IRS prepared substitutes for returns or SFRs, which were based on Forms 1099, W-2, etc. that third parties provided to the IRS. SFRs are tax returns the IRS prepares for you if you do not file your own tax return.
Mr. McGowan filed a petition with the U.S. Tax Court to contest the amount of income and expenses that the IRS allowed.
With respect to the allowable deductions, Mr. McGowan argued that the IRS allowances did not account for mileage deductions and deductions for unreimbursed meal expenses arising from his work as a pilot vehicle escort for Safe-Way and William J. Loosemore, Jr.
Mileage Deductions for Truck Drivers
Can Truck Drivers Write Off Mileage?
Our tax laws allow taxpayers a deduction for car and truck expenses. Taxpayers can elect to deduct actual costs or estimate the cost using the standard mileage rates.
These rules are different for truck drivers. Truck drivers have to use actual costs. They cannot rely on standard mileage rates.
Truck Drivers Who Use Passenger Vehicles
But Mr. McGowan was not a real truck driver. He did not operate a big rig. He operated a passenger automobile.
Passenger automobiles are listed property. As listed property, as defined in Section 280F, contemporaneous mileage logs are generally required for the use of a passenger automobile. These rules apply as Mr. McGowan was driving a passenger vehicle rather than a semi-truck.
Mr. McGowan did not have a contemporaneous mileage log for his car. Instead, Mr. McGowan prepared an estimate of the mileage. He used the estimate to argue that he was entitled to the standard mileage rate allowed by the IRS.
The court relied on the mileage log maintained by Safe-Way, which provided mileage that was less than half of the amounts Mr. McGowan had estimated. The court allowed this mileage at the standard rates.
This case shows that taxpayers are able to get mileage deductions even absent perfect records. Meal and entertainment expenses are a different story.
Meal & Entertainment Expenses
Over the Road Truck Driver Meal Deductions
Our tax laws also allow taxpayers to deduct meal and entertainment expenses. These expenses generally have to be incurred while traveling away from home. They generally have to be for overnight travel.
These deductions were eliminated in the Tax Cuts & Jobs Act for truck drivers who are employees. Those who are owner-operators or independent contractors can still claim these valuable tax deductions.
Standard Per Diem Rate for Truck Drivers
The General Services Administration publishes guidance each year that provides the per diem rates for meals and incidental expenses paid or incurred for travel away from home.
These amounts can be used in lieu of actual expenses to compute the meal and travel expenses. These expenses are deemed substantiated, provided the individual substantiates the elements of time, place, and business purpose of the travel expense.
Mr. McGowan also argued that he was entitled to a deduction equal to the published per diem rates for meals for each day he drove his automobile as a pilot vehicle escort.
The court noted that Mr. McGowan did not provide any information regarding the time, place or business purpose of the meals for which he claims an allowance. The court also noted that Mr. McGowan’s pilot escort activities did not last more than one day each. The travel must generally include an overnight stay to be deductible. Thus, the court did not allow Mr. McGowan to deduct his meal expenses.
How to Calculate Per Diem for Truck Drivers?
In order to calculate your per diem, you must know which tier the city is in. Per diem rates for meals vary by location. They are categorized into six tiers.
Major cities typically have the maximum per diem tier; smaller cities that host substantial business-related travel have per diems that fall between tiers 2 and 5. Areas that are not typically visited by business travelers will have the minimum tier rate.
You can look up the per diem rates by visiting the GSA website. It allows you to search by city, state, or zip code by tax year.
How much can truck drivers deduct for meals?
As a rule of thumb, truck drivers should be able to purchase at least three meals for each day of travel.
As this case shows, those who cannot qualify for the per diem meal rates may find it hard to get any deductions for their meals.
Absent qualifying for the per diem rates, taxpayers have to apply the standard, but higher, substantiation rules for meals. These rules set a very high bar that very few taxpayers can actually meet. The rules require contemporaneous and detailed records. These aren’t the type of records most truck drivers keep.
Truck drivers who cannot qualify for the per diem rates should consult with a tax attorney. The tax attorney can help set up a record-keeping system that works for the particular truck driver and their daily work routine. This can help ensure that their tax returns and deductions survive if audited by the IRS.