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Subject:Re: A Per Diem story, does this sound right? From:Dick Margulis <ampersandvirgule -at- WORLDNET -dot- ATT -dot- NET> Date:Mon, 9 Mar 1998 17:07:57 -0500
Whether this is the typical arrangement or not, the IRS has very
specific rules about what part of your income can and cannot be
considered non-taxable, no how your employer characterizes it.
You should _not_ file your federal or state tax return based only on
what the agency tells you, but rather seek the advice of a qualified
accountant--preferably a CPA, not your local H&R Block trainee.
As I understand the basic rule (caveat: I am not an accountant), certain
expenses that you have in working at a distance from home are
deductible. You add up these actual expenses. If the per diem you've
been paid (i.e., the untaxed income you've received) exactly matches
that total, you're fine. If it is more, then you owe the taxes on the
difference. If it is less, then you have an additional deduction coming.
But in any case, you will be filing itemized deductions, and the real
rules in this specialized circumstance are more complicated than what is
printed in the instructions that come with the tax form (which tend to
simplify in the direction of giving the IRS more money than you really
owe them).
Dick Margulis
Len Humbird wrote:
>
> I'm curious how per diem is paid to workers living and working away from
> home. The first time I was paid per diem worked like this.
>
> I was offered a contract position more than 100 miles away from home. The
> offer was that they (the agency) could pay as much as $400 per week,
> depending on what my estimated expenses were. That was subtracted from my
> weekly gross pay and then issued as a separate, non-taxed paycheck.
>
> The way this was ultimately worked out was that my calculated hourly rate
> was reduced by about $10/hr to compensate for the per diem. This was
> explained to me as, "that's how the industry does it", "we couldn't afford
> to pay you $400/wk in addition to your normal hourly rate", and "this puts
> you in a lower tax bracket because it's non-taxible income". The bizarre
> part is that I later found out that the agency's written policy regarding
> per diem payments is completely the opposite of the way it was actually done.
>
> About the same time, I moved to the city where the contract was taking
> place, and shut off the per diem arrangement. I haven't yet talked to an
> accountant about all this. Is this the way it's supposed to work? What are
> your experiences on this?
>
> Thanks.
> Len
>
