Per Diem Question

Appleman,

Disclaimer: This post is not intended to be taken as professional advice seeing as how I don't know your exact tax situation. This is only meant to address "common" situations as it pertains to per diem."
I've been doing taxes and transportation taxes for a few years and I have a degree in Accounting (almost done with my Master's), in order to qualify for per diem you have to be away from your home of residence OVERNIGHT in order to qualify for the daily rate. In addition, you would take 125*59=7375 7375*.8=5900 minus 2% of your gross income. The only way you get the advantage is to itemize on schedule A. This year in order to itemize your deductions must exceed $11900 if you file married filing joinly (which I recommend. If you don't you lose out on other certain tax credits). Furthermore, I'd keep copies of your logs in the event you get audited to show that you were away from your home during the periods claimed.

 

Thanks, jtannillo. I have a question for you. I am having a problem w/per diem. Wanting to find out if my W-2 at end of year, and using your example. Will the Line 1 from the W-2 show the $40,000, or will it show the $30,000? Or, will Line 1 show Gross, and maybe the Line 3 will show the per diem deducted? Or similar. haha. It is confusing, to say the least.
I DO know tho, they don't pay their '1/2' S.S. contribution, and I do think it will get paid by US at the end of year... So probably will end up paying half of the SS rate of 14.7% I think),,,ala we pay the 7% on that 10,000. I think that is right. And we have to adjust that '80% of $59' thus end up paying our SS part as a Self Employed person, instead of an Employee.
Anyway, I just want to know what the W-2 Line 1 will show, based on your $40,000 Gross example, if you can answer I'd appreciate it.

 

The calculation for you situation goes as followed. The current standard deduction for a single filer is 5,950. You get to claim 80% of 59 dollars a day for each night you are out. If that number comes to more than 5950 even by one dollar then it is worth it to just claim the itemized amount. If not than you take the standard deduction. If you are filing with your wife then I can already tell you take the standard deduction. If you were out 125 night then just take the standard 5950. 125 X 59(80%)=5900. That is less so take the 5950.

 

If you are on a company sponsored per diem program the perdiem will show up in a separate box as "Per Diem" followed by an amount. I believe it was box 13 but I am not sure. So no the per diem is in a box by itself. Line one will show the 30000 for example then the box for Per diem will show the non-taxable 10000 dollars for example.

 

I am not an accountant but the company programs save them money on payroll tax. In my experience you actually gross more in per diem if you just wait till the end of the year. Its just better not to be on the program if your company doesn't require it.