Base Pay + flat-rate "Per Diem"

bermovick · February 2014

Has anyone else ever heard of this? I just had a place say that they offer a certain amount as W-2 taxable pay, with another $/hour counted as "per diem" (claiming that since the per diem rate isn't taxed, it's the equivalent to a higher amount)

This just seems ... odd, and google is giving me conflicting information.

Akaricloud · February 2014

I've only ever seen per diem pay as an alternative to specific expenses while traveling and the IRS has pretty strict rules on this.

If they're trying to abuse this type of pay I'd suggest getting as far away from that as possible.

bermovick · February 2014

Just in case my understanding is wrong, here's the email quoted (with dollar values removed)

What we could do is break up the rate so that $XX/hr is W-2 (taxable) and the remaining portion would be for per diem. This would be a significant difference per week in take home pay as the remaining $YY/hr would not be taxed.

The only requirement is that you maintain a current permanent residence and a temporary residence in the location you are working.

When we include per diem inside the rate it can make it near equivalent to making $ZZ/hr (all W-2).

Akaricloud · February 2014

Well that really comes down to whether or not the job has you doing things that would qualify for per diem pay. Are you traveling to customer sites all day and having to stay overnight places?

This sounds like tax evasion to me personally.

Priston · February 2014

Can you give us more information? Is this from a job offer? Does the job require traveling? How much travel?

like the offer said, you need a permanent residency to get per diem. So if your traveling 100% and don't need or want a permanent residency then It would be better to take more pay and no per diem.

bermovick · February 2014

It's a 2 year govt contract, through a large, well known IT placement agency.

The description doesn't mention travel, but does have the caveat

The only requirement is that you maintain a current permanent residence and a temporary residence in the location you are working.

EDIT: If what they're doing is what I think: Current permanent and TEMPORARY residence where working, then ... that's really clever. The per diem would work out to about $100 per day which is typical per diem (from what I've read), and I already have continued leaving my permanent residence in IL while I move around via contracts.

Base Pay + flat-rate "Per Diem"

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