The idea of per diem is to be economically neutral to the employee. It's function is to give you expense money now rather than get your expense money later after you file taxes. If it's obviously better or worse than not receiving per diem it's not set up properly.
It's meant to operate like an immediate rebate of a future tax refund. Think of a store giving a $50 discount on a product or the same store not giving the discount but giving a $50 mail-in rebate. Sure, there are some stores that give rebates they know few will redeem, but that's not common.
But the surest way to avoid getting scammed, however rare that may be, is to avoid per diem and file the IRS Form 2106 and recover expenses after the tax year. Frankly, I would not work for a company if I thought they were capable of scamming employees with a dishonest per diem scheme. You have to do the math both ways to be sure, but an honest program will be economically neutral, assuming you aren't so hand-to-mouth you can't afford to deduct expense at the end of the year.
Tuitio reimbursemant and per diem. Good or bad??
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tscottme is the one poster who really knows what they are talking about, listen to this person!
I have had per deim effect my paychecks for well over a decade. American Trucker seems like an extremely hard working dude, who is bustin his ace and makin some cash, lot of respect for this poster, but he knows nothing about what a per diem is. The dude is absutly clueless. Why someone post so strongly and authoritatively about a subject they know nothing about is a bit of an enigma.
You get a bigger refund because hopefully you worked it out to where you will be in lower tax bracket. Lower tax bracket means less taxes you pay. Getting a big check at end of year is not good. Say you were a billionair and thought the same way. You over pay uncle sam by say a million dollars just a little bit each month, never miss that million bucks, sure is nice to get that money you overpaid uncle sam back at end of year, almost like winning the lottery. That million bucks you overpaid uncle sam that you will get back uncle sam invested and turned into say 1.3 million. Wouldnt it be smarter for you to not pay uncle sam instead invest it yourself and turn it into 1.3 million for yourself. How friggen stupid can you get. Intentionally overpaying on taxes to get a big refund at end of year has got to be one of the stupidest asinine things I ever heard. Its always better to owe money at end of year, if you are responsible enough to set aside what you will owe. Invest that money!
Earlier discussion same subject:
Originally Posted by gravdigr
one other thing on per diem I just learned. Since you are not claiming that income it does not count for credit purposes. So if I'm trying to buy a new pickup I may not get financed if my income looks like it's less than it really is.
You are right on that of course, but there is a trade off as well. Thats a double edged sword. The less you make the lower tax bracket you are in, so with per diem not only do you get a fair some of your hard earned money completely tax free forever, you also have the ability to stay in a lower tax bracket becouse you make less money. The lower the tax bracket you are in the smaller the percentage of your extremely hard earned cash uncle sam takes. The higher the tax bracket you are in (the more money you make) the higher the percentage of claimed income that the irs steals from you.
As far as looking like you make less effecting a vehicle purchase. I honestly dont know anything about that. I do know that the "buy here pay here" dealerships go almost exclusively off that, I would think respected banks or loaning companys would put a greater emphasis on credit score. I would aso think that even though on your tax forms it shows you making a lot less money than you really did, your pay stubs or online statement will give immediate proof of how much you really made each month, once again assuming that having almost instant proof online or if your company doesnt email or otherwise post it online that your paper pay stubs would also renege on that lower income than you really made concept.
You do have proof of how much you really made, everything will show that you did make the full amount, but that a certain percentage of what you made is exempt from taxes.
one other thing on per diem I just learned. Since you are not claiming that income it does not count for credit purposes. So if I'm trying to buy a new pickup I may not get financed if my income looks like it's less than it really is. __________________
Another brilliant quote:
I see both views on per diem... they make sense.
I personally don't have a problem saving paperwork and doing my taxes for a return at the end of the tax year.
One can only assume that if you're getting tax-free money "refund early every week" there are penalties for it... like a small return at the end of the tax year and giving up the $.02 to your employer.
While I can understand how per diem might work for one person, I'm all for just staying off of it and doing my own taxes at the end of the tax year.
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