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  • Dec 2, 2009, 01:20 PM
    Income tax per diem salary means
    I am a foreigner got a 4 months contract job in Texas with H1B visa. Employer paying me salary 40$ per hour (split 31.21USD pay, USD8.79 per diem). As my understanding per diem rate is non taxable if it is less than 6 months, so how much % should I pay income tax for the USD31.21/hour.

    Please clarify my query.

  • Dec 3, 2009, 11:06 AM

    I assume you are a W-2 employee.

    If so, you are liable for the employee's share of the FICA (Social Security @ 6.2% and Medicare @ 1.45%) taxes, which are flat taxes withheld at the perentages noted.

    You are also liable for federal income taxes, which will be withheld from your salary based on the number of allowances you claim on the Form W-4. By IRS rule, you can claim no more than ONE allowance, so the taxes withheld will MORE than cover your federal tax liability.

    Texas has NO state income tax, so no worry there.

    Your employer may or may not tax the per diem allowance. In either case, you should deduct your daily living expenses (as specified in IRS Pub 1542) using Form 2106 and the Schedule A on Form 1040NR. Even though you are getting per diem, it will NOT cover the daily living expenses as allowed in the Form 1542, and you CAN claim those daily living expenses because your work tour is LESS than one year.

    If you need professional help with your return, contact me at [email protected].

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