My husband is a professional musician in a national touring act. He is paid per show and receives a pay check with taxes taken out for each show. 98% of his shows are out of town (out of state) and he and the band members are either on a tour bus or take a flight out of town. My question concerns per diem pay for his out of town stay. He is paid $35 a day for any overnight stay while he is on tour. He is paid in cash. How will this affect our taxes? Will this be considered income? If it is income can we offset the amount by claiming the meals deduction? They are not taking out taxes for the per diem and this scares us as we have not been keeping up with the money amounts. Actually my husband uses all most all of it while he is on the road to pay for his meals. Will this mess up our taxes?

A lot will depend upon how your employer reports per diem on your W2. If your employer reported any amount in box 1 of W2, then it is your income. You will take deduction for your expenses as itemized deduction.

The job related expenses appear on line 21. The job related expenses are certain miscellaneous deductions are subject to 2% AGI limit. That is you can deduct only the part of these expenses that exceeds 2% amount on Form 1040, line 38.

Actually, the per diem payment MAY be reported on Form 1099-MISC, which would then be reported on Line #21 of Form 1040.

The expenses have to be detailed on Form 2106, with the final amount transferred to Schedule A as an itemized deduction.

If the per diem payments are NOT reported on Form W-2 or Form 1099-MISC, then your spouse should NOT report the expenses as a deduction.