What if it Snows?

That’s not correct. Per diem, PAID BY THE COMPANY is a reimbursed employee expense, which is not income. It WILL save you BOTH your half of FICA (7.5%), AND federal state and local income taxes.

The negatives are lower contributions by the company to SS and things like 401(K) matches.

Pushing your income lower can also be tremendously helpful if you are buying health insurance on the exchange, have kids in college or are paying alimony.

 

I thought as of 2018 the tax law was changed to make per diem a non deductible income item for W2 employees?

I'll be honest, tax law is not my strong suit.

 

Correct, if taken on your taxes as UNreimbursed employee expenses.

By making them reimbursed expenses, they remain non taxable, because they never show on your w2.

 

To much dang paperwork to do . lol finally headed to bed now

 

2018 raised the personal exemption to where most peoples combined deductions (including Per dium) was less than the standard deduction so no point in filing the long form. Owner ops with a bunch of deductions (like fuel, maintenance, and mortgage) have enough deductions to go to the long form and track per dium.

The model folks are going to now is: part of compensation is a per dium reimbursement from the company. As a reimbursement it is tax free to the recipient and is an business expense for the company and is not subject to payroll taxes. Kinda like how when the company reimburses construction and warehouse folks for their safety shoes. Company wrights off the expense. Employee does not report that money as income.


Company benefits from a per dium scheme via less payroll taxes.

Employee has less taxable income because part of their pay is a reimbursement.

The lower reported income lets the employee pay less for mandated health insurance and may help them get other govt assistance programs.

The lower reported income also makes it harder to qualify for financing that looks at income for say a house or car.

 

Well now my brain is broken. I mean I get it I guess. Instead of looking at it as increased pay, it actually reduces my tax liability, which then is technically more $ in my pocket. Right?

 

Well from the perspective of a some shady company: Employee should see about the same size take home check. The company will pays less in taxes.

Dark side of the discussion is employee will be paying less into Social Security. And will get less monthly benefit out, if the employee actually lives to retirement age.

 

Yep those are the shorter term issues to a lower taxable income

Thanks Dave.... I see now I was being too P.C.

How about: "Grab your ankles cause now the Company wants some of what the IRS has been getting......."

Is that better?

p.s. that was kinda therapeutic for me.