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Can someone please tell me if per diem is taxable? My brother took a job this past year and half his salary is per diem, as he travels daily. He receives a monthly expense allotment for which he submits receipts. His per diem is for meals and accommodations only. Of course, he has asked me to file his taxes next year as he is traveling and I'm trying to understand the implications. Any help would be appreciated.
First half of a salary may appear to be "per diem" but that is not what it is,
On his W2 form it shows specificly what the earnings are. Actual per diem will be shown as an expense account payment and should not be listed as income.
Now per diem should be an an amount to cover hotel bills, and food bills. Some companies do that instead of having employees fill out detailed expense reports. Now if he turns in exact expense accounts, the payment for travel should not be per diem but actual expenses??
But I will say this, if you are not trained to do taxes, you don't need to be doing a more complicated tax invoving this. Not trying to sound mean, but laws on this are very complicated as to what is deductable and what is not
If they are paying him a gross pay and requires him to pay his own travel expenses from that, it is totally different.
OK - he receives gross pay and then per diem for meals and hotel stays. He also has expenses like gas and replacement tires, etc. (true expenses). If per diem is listed as an expense account payment and not as income, it should not be taxed, correct?
Per diem is to pay for his expenses, such as meals hotels and the such and are not income, if the company reports it as income, then he needs to keep his reciepts to use as deductions,
But a company payroll knowing what they are doing would not mix per deiim with iincome. Since it is not taxable,and if it is mixed withincome there will be withholdings.
At this point while I can explain how it may show up on his check, if they put it allon one check, I am not able to explain it to make sense without showing a copy of one.
But he is suppose to be spending the per diem on expenses, and the compay is writing it off their taxes as a business expense.
But you will have to see how they are doing it on his check and how it shows on his W2. Aa
What Fr Chuck is trying to say is that it depends on whether your brother's company uses an accountable or non-accountable plan.
In an accountable plan, detailed expenses reports are required to track the actual expenses incurred while working. It seems, based on your descriptions above, that his company does use an accountable plan. Payments from an accountable plan are in fact reimbursements for expenses incurred and are NOT taxable.
In an non-accountable plan, a per diem amount is paid as part of income and the recipient is not required to account for his expenses. In this case, the per diem IS taxable and the recipient has to try to offset that additional income by filing Form 2106 and deducting the income as an itemized deduction on the Miscellaneous Deductions portion of Schedule A.
I work for a company which pays me a Per Diem while on the road. This amount varies by the location (usually ~$40 / day). The amount is simply to cover food and misc. expenses (dry cleaning) while on location. I do not itemize the expenses or submit receipts for these expenses and I keep the remainder of the per diem. Flights, cabs, rental cars, hotels are all itemized expenses I submit to my company for reimbursement. The itemized expenses and the per diem are lumped together as a line item on my paycheck called "expense reimbursement". This line item is not added to either my Gross Pay or my AGI so it is not taxed.
I'd suggest talking to your brother's finance or legal department. They should know the answer to the question.
Per diem for food and misc expenses does NOT have to be specifically accounted for if the other expenses are properly reported to retain the tax exemption, as long as the per diem for the food and misc expenses matches the federal per diem standard.
$40 per day is in line with federal per diem.
Yes, I forgot to mention that my company follows the ferderal standards for per diem.
Thank you all! This helps. I will wait to see his W2 and then try to figure it out from there. He receives salary and per diem. Per diem is for meals (35/day) and lodging (100/day) - depending upon city. If top 10 market, lodging is 150/day. My question was basically - if he only spends 85-100/day, will he be taxed on the remainder? Will he have to claim it? But, like I said, I will wait to see his W2...
Glad to help!
I went to truck driving school so I could get a different job, will I be able to deduct it as a
Business expense
You can deduct job hunting expenses. Additionally, you can deduct education expenses for your job if they are required by your employer.Quote:
Originally Posted by rocknrodney
Deducting the truck driving school MAY be a chancy deduction, because the school qualifies you for the job. The IRS normally does not allow such education to be deductible. If they did, lawyers and doctors could deduct the law school and medical school tuition.
I was under the impression, and maybe wrongly so, that per diem is taxable to the employee and that the employer is required to withhold taxes IF the employee is away from their PCN for more than 50% of the year on a "long-term" duty assignment. Per diem is only non taxable when the employee is away from their tax home. And tax home is questionable after you are gone more than that 50%. So, if the IRS is stating that anything in excess of 6 months is long term, then should I be prepared to pay taxes on that per diem if we are gone for 3 straight years?
The reason I am asking is that my husband has an offer to work in opverseas for 3 a year stint. We would all be moving there for those 3 years, and he would be given the current (FO)CONUS max per diem rate of $350 per day to pay for our living expense while overseas. I know that per diem rates change often as well. So I'm not sure what it will be each year. But for now, that's the max amount for our location. I have already been prepared to pay tax on that compensation, which will also change our current tax situation a bit.
One more question. Would we still file our taxes as if we were living in the US for those 3 years? I really appreciate your answers.
Thanks...
Yes, you must file U.S. tax returns as long as you are a U.S. citizen.
While overseas, you may be eligible for the Foreign Tax Exclusion.
I do business as a sole proprietor and will be working away from my home (out of state, to Hawaii) for approximately 150 days. Lodging is paid for by the company I'm contracting to, but aside from my general pay, I am also paid Per Diem in accordance with the federal rates. Will I be paying taxes on the Per Diem that I am paid?
Shouldn't be taxable if it's a reimbursement.
Agreed; as long as the time is LERSS than one year, the per diem should remain tax-free.
Even if the employer is pay him as Per Diem, and if the employer does not have "Accountable Plan" in place , then it would become taxable. It is important for you to find from the Employer.Quote:
Originally Posted by T_Mili
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