can some one please explain per diem pay??

Okay, but my question is what happens to the $$ (if any) that is over the limit?

 

That I do not know, but would be willing to bet it has to be reported as taxable income. The amount however would seem very small overall.

 

GO here to get acurate information on Per Diem http://search.irs.gov/web/query.htm...=0&oq=&qt=per+diem+pay&search.x=17&search.y=7

 

12 cents sounds good, I was getting 9.8 cpm perdiem at Covenant. And that is figured into every paycheck.

 

Actually .12 CPM is a little high. If an employer pays expense allowances that exceed the federal per diem rates, the excess amounts are subject to income tax and employment tax if they are not repaid to the employer, unless the employee actually substantiates all of the expenses covered by the per diem allowance.

So at .12 CPM if you drove 500 miles a day thats $60, if the most you can deduct is 75% of $52 a day, the difference would have to be reported as taxable income.

 

I did some number crunching using the 2006 IRS information on tax withholding, tax rates and per diem allowances.

Assumptions:

• Drive 120,000 miles a year evenly over 52 weeks (2308 miles per week)
• Pay rate .30 cpm
• Per diem rate .10 cpm
• Per diem allowance $59 per day
• Per diem deduction allowance $44.25 (59 x .75)
• Days away from home 300
• Single Driver claiming one deduction
• No other qualifying itemized deductions
• No other payroll deductions ( advances, insurance, 401K etc.)
• No State Income tax

These are just very general numbers used for computations, your numbers will vary but this still should show the Pros and Cons of taking per diem

Example 1 Do not take per diem pay​

Weekly pay $692.40 (2308 miles at .30 cpm)
Withholding Allowance $ 65.38

Taxable Income $627.02
Federal Tax With held $ 68.00
FICA (.0765&#37 $ 42.77

Take Home Pay $516.25

Federal Taxes at the end of the Year​

Gross Income for the year $36,004.80 (52 x 692.40)

Personal Deduction $ 3,300.00

Itemized Deduction $13,275.00 ($59 per diem x .75 for
300 days)
Taxable Income $19,429.80

Taxes on Income $ 2,536.97

Total Federal Taxes Withheld for the year $ 3536.00 (52 x 68)

Refund you get $ 999.03 (3,536.00 paid in minus
2536.97 due)

Example #2 Take per diem pay of .10 cpm​

Weekly pay $461.60 (2308 miles at .20 cpm)
Withholding Allowance $ 65.38

Taxable Income $396.22
Federal Tax With held $ 35.00
FICA (.0765%) $ 30.31

Take Home Pay $330.91
PLUS $230.80 (per diem of .10 cpm x 2308 miles)

Total Take Home Pay $561.71

Federal Taxes at the end of the Year​

Gross Income for the year $24,003.20 ( 52 x 461.60 )

Personal Deduction $ 3,300.00

Itemized Deduction $ 5,150.00 (standard deduction)

Taxable Income $15,553.20

Taxes on Income $ 1,955.48


Total Federal Taxes Withheld for the year $ 1,820.00 ( 52 x 35 )

Amount Due the IRS $ 135.48





Also remember, you contribution to Social Security will be lower if you take the per diem and that may effect the amount of money you get when you retire.

Your situation will be different. When you consider State Income Taxes, other itemized deductions like mortgage interest, not getting paid the same every week, payroll deductions for health insurance and 401K, number of personal deductions, etc you would have to have a tax professional determine which is better for you.

Well I hope this helps ( yeah right). The best conclusion I can give you, GET A TAX PROFESSIONAL TO LOOK AT YOUR SITUATION.

 

Thanks Mr G. very informative.

 

wow thanks for the info mr. green jeans. you took some serious time on that and it is well done. that info is very helpful......

 

Hey Mr Green Jeans I got a ?

When you look at your figures if you take per-diem, is it not true the only portion of per-diem you would have to record as taxable income would be the difference you were paid, vs 75% of $59, deduction. It does not make sense that you will owe such a huge amount by taking per-diem.

 

did some checking on this

quote from the IRS site

Generally, amounts employers pay employees to reimburse them for substantiated business expenses are not subject to income tax or employment tax. For reimbursements for expenses for meals and other incidentals associated with business travel, employees get this exclusion for reimbursements for each day of travel up to the federal per diem rates

Therefore you are right,

As long as the per diem paid by the employer is below the federal guidlines you do not have to claim it as income.

Therefore I have amended my last post and it know shows that taking per diem you would get refund.

Thanks for pointing this out but this is still a very confusing subject and Everyone including Me needs a good tax advisor.

Mr. Green Jeans