The Per Diem Chat.

[derg]

Ok, "per diem" is NOT compensation.

No matter how you use it, it's not.

The IRS defines per diem as...

Per diem is an allowance paid to your employees for lodging, meals, and incidental expenses incurred when traveling. This allowance is in lieu of paying their actual travel expenses.

Per diem payments are not part of the employee’s wages if the payment is equal to or less than the federal per diem rate and the employer receives an expense report from the employee.

A very simple way of looking at it is that on April 15th, when you file your tax return for your previous year of employment, you can deduct the standard "per diem" rate (plus any higher, city-specific amount) from your taxes owed.

Some companies will pay monthly per diem reimbursements, so you have 'cash in hand' now, rather than waiting to deduct your travel expenses from your tax liability.

Here's a real-world example.

In 2008, I had $17,101.50 that could be entered on IRS Form 2105 for Employee Business Expenses, Line 5.

My employer paid only $6,781.19 of my tax-deductible Employee Business Expense

So throw in the 80% Deductible Meal Percentage and some other tax rate math, and I was able to deduct, from my tax liability, another $3,064.41.

This was not "income", this was a "Tax Savings". So less taxes paid, rather than income owed to me by my employer.

 

[SoCalAprch]

Who does your taxes Doug?

 

[derg]

I have a local accountant here in Scottsdale. But the city by city, hour by hour breakdown to maximize per diem is a product of Flightline Data Services.

$50 to run the numbers and it nets at least an extra $3,000 to $4,000 per tax year.

 

[aloft]

So throw in the 80% Deductible Meal Percentage and some other tax rate math...

Milka-what?

 

[derg]

Percentage of your "Meals" expenditures that are deductible.

Like if you write off a $90 business lunch, you can't deduct the whole $90.

Ain't no Ten-Fowty EEE-zay 'round this mug!