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w2contractor · May 21, 2008, 08:59 PM

Hi,

I am a w-2 contractor. My primary residence and family are 60+ miles from home and I maintain an apartment at my work location where I reside for 4 days a week. Right now my company shows part of my income as non taxable per diem. I've hear but have not confirmed that this only last for a year. Is this true? I cannot find any state or federal tax laws or information on this.

Thanks!

MukatA · May 21, 2008, 09:09 PM

You are getting per diem as non taxable income.
If your expenses are more than that, then you can claim deduction for the difference under employee's business expenses. This is itemized deduction subject to 2% of AGI.
Read itemized deductions:
Your U.S. Tax Return: Itemized Deductions

w2contractor · May 21, 2008, 09:12 PM

Originally Posted by MukatA

You are getting per diem as non taxable income.
If your expenses are more than that, then you can claim deduction for the difference under employee's business expenses. This is itemized deduction subject to 2% of AGI.
Read itemized deductions:
Your U.S. Tax Return: Itemized Deductions

That wasn't my question. I asked if there is a one year limit.

MukatA · May 21, 2008, 11:16 PM

No, there is no such limit.
Only that non taxable per diem is accountable and you must return any excess amount received within a reasonable period.

AtlantaTaxExpert · May 22, 2008, 10:05 AM

Actually, I have to disagree with MukatA on this one.

If you receive per diem for more than one year, the IRS will hold that said per diem is NOT a non-taxable reimbursement of expenses, but rather taxable compensation, because your siatuation is no longer considered to be temporary in nature once it exceeds a year.

w2contractor · May 22, 2008, 03:55 PM

Yes that's what I've heard. Its very vague, but once your there 1 year your situation is no longer temp. What isn't clear to me is whether you get taxed on any per diem you took as non taxable before. For example if my contract is extended from 1 year to 2 years is the IRS going to come back and say I owe taxes on the first years per diem?

delite · May 22, 2008, 09:28 PM

Originally Posted by w2contractor

Hi,

I am a w-2 contractor. My primary residence and family are 60+ miles from home and I maintain an apartment at my work location where I reside for 4 days a week. Right now my company shows part of my income as non taxable per diem. I've hear but have not confirmed that this only last for a year. Is this true? I cannot find any state or federal tax laws or information on this.

Thanks!

Generally pe diem expenses are not taxable to the extend you have accounted to your management for the exoenditures. This ruoes applies for all years.if your expenes
Exceed reimbursement (which may be hard to prove) you can write them of under itemized deductions

AtlantaTaxExpert · May 23, 2008, 07:24 AM

As Delite noted, per diem properly reported under an accountable plan is generally considered non-taxable, and is VERY difficult for the IRS to properly track.

That does NOT change the IRS policy that any per diem received after one year is considered taxable income.

That said, the IRS generally does not try to recover per diem claimed in the first year, because they cannot interpret the INTENT of the first year. In other words, the payment of per diem as reimbursement for temporary expenses can safely be claimed in the first year because neither you nor the IRS know FOR SURE that the situation will not be temporary come the end of the first year.