Per Diem Question

#7 01-22-2005, 05:11 PM

**THE-RFI-EMI-GUY** wrote:
- quote -

> Harlan Lunsford wrote:
> > Christopher Green wrote:
> > > lcali[at]yahoo.com wrote:

> > > > My employer worked out a plan for us where they made the
> > > > hourly employees "per day" salaried employees meaning we get
> > > > paid a amount per day regardless of how many hours we put
> > > > in, what matter is how many days we work. In exchange they
> > > > give us half of our salary as a per diem even though I dont
> > > > really have any expenses besides gas to go to work 45min
> > > > away each day, therefore I keep no receipts. We were told we
> > > > will be OK and will not have to pay taxes on half of our
> > > > salary. I recently got my w2 and noticed they have half of
> > > > my salary as "per diem reimbursement". Im wondering of what
> > > > you guys think about the legality of doing this and weather
> > > > this is in fact a way to basically get paid half of my
> > > > salary "under the table" legally?

> > > No, this is not legal and will get everybody in a great deal
> > > of hot water if it is actually implemented.
> > > > > You can pay an allowance for expenses, call it per diem or
> > > whatever you want. But it is taxable unless it is done
> > > through an "accountable" plan. This means you must account
> > > to your employer for expenses; anything over your expenses
> > > must be returned or it becomes taxable income.
> > > > > Since your commuting expenses are never deductible anyway,
> > > what you have is, first, a nonaccountable plan that doesn't
> > > result in you receiving any money that is legally free of
> > > tax; and second, a sham that is being implemented solely for
> > > the purpose of defrauding the IRS and the SSA. If the
> > > amounts involved are enough to get enforcement interested,
> > > it will end up very ugly indeed.
> > > > > If your employer will not revert to a legal system of paying
> > > wages, you may be left with the uncomfortable choice of
> > > blowing the whistle or resigning to seek work with an honest
> > > employer.

> > Well, Chris, I don't know about that last part. The OP may
> > actually love his job and not even think about leaving, or
> > may not be able to, whatever.
> > > What if he instead of making waves, simply uses a substitute
> > W2 form for the additional amount, reports it and pays the
> > tax on it? He'll not be in any trouble personally, and can
> > keep the job. But I would advise him NOT to advertise to
> > other employees what he's doing.

> Won't he continue to be ripped off for withholding tax and
> social security benefits?

He can account for his share by adding a Form 4137 to his
1040 (for FICA) and by making estimated payments (1040-ES).

================================================
Moderator: Please snip this if you reply to it.
================================================

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#6 01-18-2005, 02:24 AM

Christopher Green wrote:
- quote -

> Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:

> [snip]

> > What if he instead of making waves, simply uses a substitute
> > W2 form for the additional amount, reports it and pays the
> > tax on it? He'll not be in any trouble personally, and can
> > keep the job. But I would advise him NOT to advertise to
> > other employees what he's doing.

> I'm concerned that this is a scam to evade employer's share
> of Social Security taxes. If IRS is on the ball, and the
> amount is large enough (it should be, if we're talking half
> the salary of an office), a substitute W-2 for half an
> employee's wages should draw an employment tax audit. The OP
> should be fine, except for the possibility that his employer
> will be hit so hard as to be unable to pay everybody's
> wages.

Very true, this IS such a "scam" to avoid employer payroll
taxes, all of them, not just FICA.

Now, as for IRS being "on the ball"..... don't count on it.
I'm (almost!) willing to be that in their sophisticated
processing software is no sub routine which would ferret
this out. Perhaps an eagle eyed auditor upon examination,
yes.

One of my former clients in construction industry, is still
in business so I would guess he's still paying his men an
added "per diem" for meals of 25$ per day, whether or NOT
they're out of town over night.

ChEAr$,
Harlan Lunsford
Sun, 16 Jan 2005

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#5 01-16-2005, 09:23 PM

Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:

[snip]

- quote -

> What if he instead of making waves, simply uses a substitute
> W2 form for the additional amount, reports it and pays the
> tax on it? He'll not be in any trouble personally, and can
> keep the job. But I would advise him NOT to advertise to
> other employees what he's doing.

I'm concerned that this is a scam to evade employer's share
of Social Security taxes. If IRS is on the ball, and the
amount is large enough (it should be, if we're talking half
the salary of an office), a substitute W-2 for half an
employee's wages should draw an employment tax audit. The OP
should be fine, except for the possibility that his employer
will be hit so hard as to be unable to pay everybody's
wages.

--
Chris Green

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#4 01-16-2005, 09:23 PM

Harlan Lunsford wrote:
- quote -

> Christopher Green wrote:
> > lcali[at]yahoo.com wrote:

> > > My employer worked out a plan for us where they made the
> > > hourly employees "per day" salaried employees meaning we get
> > > paid a amount per day regardless of how many hours we put
> > > in, what matter is how many days we work. In exchange they
> > > give us half of our salary as a per diem even though I dont
> > > really have any expenses besides gas to go to work 45min
> > > away each day, therefore I keep no receipts. We were told we
> > > will be OK and will not have to pay taxes on half of our
> > > salary. I recently got my w2 and noticed they have half of
> > > my salary as "per diem reimbursement". Im wondering of what
> > > you guys think about the legality of doing this and weather
> > > this is in fact a way to basically get paid half of my
> > > salary "under the table" legally?

> > No, this is not legal and will get everybody in a great deal
> > of hot water if it is actually implemented.
> > > You can pay an allowance for expenses, call it per diem or
> > whatever you want. But it is taxable unless it is done
> > through an "accountable" plan. This means you must account
> > to your employer for expenses; anything over your expenses
> > must be returned or it becomes taxable income.
> > > Since your commuting expenses are never deductible anyway,
> > what you have is, first, a nonaccountable plan that doesn't
> > result in you receiving any money that is legally free of
> > tax; and second, a sham that is being implemented solely for
> > the purpose of defrauding the IRS and the SSA. If the
> > amounts involved are enough to get enforcement interested,
> > it will end up very ugly indeed.
> > > If your employer will not revert to a legal system of paying
> > wages, you may be left with the uncomfortable choice of
> > blowing the whistle or resigning to seek work with an honest
> > employer.

> Well, Chris, I don't know about that last part. The OP may
> actually love his job and not even think about leaving, or
> may not be able to, whatever.
> What if he instead of making waves, simply uses a substitute
> W2 form for the additional amount, reports it and pays the
> tax on it? He'll not be in any trouble personally, and can
> keep the job. But I would advise him NOT to advertise to
> other employees what he's doing.

Won't he continue to be ripped off for withholding tax and
social security benefits?

--
Joe Leikhim K4SAT
"The RFI-EMI-GUY"

The Lost Deep Thoughts By: Jack Handey
Before a mad scientist goes mad, there's probably a time
when he's only partially mad. And this is the time when
he's going to throw his best parties.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#3 01-15-2005, 05:44 PM

Christopher Green wrote:
- quote -

> lcali[at]yahoo.com wrote:

> > My employer worked out a plan for us where they made the
> > hourly employees "per day" salaried employees meaning we get
> > paid a amount per day regardless of how many hours we put
> > in, what matter is how many days we work. In exchange they
> > give us half of our salary as a per diem even though I dont
> > really have any expenses besides gas to go to work 45min
> > away each day, therefore I keep no receipts. We were told we
> > will be OK and will not have to pay taxes on half of our
> > salary. I recently got my w2 and noticed they have half of
> > my salary as "per diem reimbursement". Im wondering of what
> > you guys think about the legality of doing this and weather
> > this is in fact a way to basically get paid half of my
> > salary "under the table" legally?

> No, this is not legal and will get everybody in a great deal
> of hot water if it is actually implemented.
> You can pay an allowance for expenses, call it per diem or
> whatever you want. But it is taxable unless it is done
> through an "accountable" plan. This means you must account
> to your employer for expenses; anything over your expenses
> must be returned or it becomes taxable income.
> Since your commuting expenses are never deductible anyway,
> what you have is, first, a nonaccountable plan that doesn't
> result in you receiving any money that is legally free of
> tax; and second, a sham that is being implemented solely for
> the purpose of defrauding the IRS and the SSA. If the
> amounts involved are enough to get enforcement interested,
> it will end up very ugly indeed.
> If your employer will not revert to a legal system of paying
> wages, you may be left with the uncomfortable choice of
> blowing the whistle or resigning to seek work with an honest
> employer.

Well, Chris, I don't know about that last part. The OP may
actually love his job and not even think about leaving, or
may not be able to, whatever.

What if he instead of making waves, simply uses a substitute
W2 form for the additional amount, reports it and pays the
tax on it? He'll not be in any trouble personally, and can
keep the job. But I would advise him NOT to advertise to
other employees what he's doing.

ChEAr$,
Harlan Lunsford, EA n LA
Fri, 14 Jan 2005

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#2 01-14-2005, 09:58 PM

lcali[at]yahoo.com wrote:

- quote -

> My employer worked out a plan for us where they made the
> hourly employees "per day" salaried employees meaning we get
> paid a amount per day regardless of how many hours we put
> in, what matter is how many days we work. In exchange they
> give us half of our salary as a per diem even though I dont
> really have any expenses besides gas to go to work 45min
> away each day, therefore I keep no receipts. We were told we
> will be OK and will not have to pay taxes on half of our
> salary. I recently got my w2 and noticed they have half of
> my salary as "per diem reimbursement". Im wondering of what
> you guys think about the legality of doing this and weather
> this is in fact a way to basically get paid half of my
> salary "under the table" legally?

No, this is not legal and will get everybody in a great deal
of hot water if it is actually implemented.

You can pay an allowance for expenses, call it per diem or
whatever you want. But it is taxable unless it is done
through an "accountable" plan. This means you must account
to your employer for expenses; anything over your expenses
must be returned or it becomes taxable income.

Since your commuting expenses are never deductible anyway,
what you have is, first, a nonaccountable plan that doesn't
result in you receiving any money that is legally free of
tax; and second, a sham that is being implemented solely for
the purpose of defrauding the IRS and the SSA. If the
amounts involved are enough to get enforcement interested,
it will end up very ugly indeed.

If your employer will not revert to a legal system of paying
wages, you may be left with the uncomfortable choice of
blowing the whistle or resigning to seek work with an honest
employer.

--
Chris Green

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#1 01-13-2005, 11:13 PM

llcali[at]yahoo.com wrote:

- quote -

> My employer worked out a plan for us where they made the
> hourly employees "per day" salaried employees meaning we get
> paid a amount per day regardless of how many hours we put
> in, what matter is how many days we work. In exchange they
> give us half of our salary as a per diem even though I dont
> really have any expenses besides gas to go to work 45min
> away each day, therefore I keep no receipts. We were told we
> will be OK and will not have to pay taxes on half of our
> salary. I recently got my w2 and noticed they have half of
> my salary as "per diem reimbursement". Im wondering of what
> you guys think about the legality of doing this and weather
> this is in fact a way to basically get paid half of my
> salary "under the table" legally?

What it sounds like is that your employer is trying to pull
a fast one on the payroll taxes. As an apparent
non-accountable plan, it doesn't change your income tax
situation at all - you get taxed on both the wages and the
"per diem" for income tax purposes.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

01-13-2005, 10:16 PM

llcali[at]yahoo.com wrote:

- quote -

> My employer worked out a plan for us where they made the
> hourly employees "per day" salaried employees meaning we get
> paid a amount per day regardless of how many hours we put
> in, what matter is how many days we work.

What line of work are you in? Do you furnish your own tools
or equipment? And/or are you a pizza delivery driver?

MTW

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

#-1 01-12-2005, 10:53 PM

My employer worked out a plan for us where they made the
hourly employees "per day" salaried employees meaning we get
paid a amount per day regardless of how many hours we put
in, what matter is how many days we work. In exchange they
give us half of our salary as a per diem even though I dont
really have any expenses besides gas to go to work 45min
away each day, therefore I keep no receipts. We were told we
will be OK and will not have to pay taxes on half of our
salary. I recently got my w2 and noticed they have half of
my salary as "per diem reimbursement". Im wondering of what
you guys think about the legality of doing this and weather
this is in fact a way to basically get paid half of my
salary "under the table" legally?

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Similar Threads
Thread	Forum	Replies	Last Post
Per diem mode of payment dilip ranganathan: Hi All This is more of an academic question. So pls bear with me. In USA I would like to know what is the normal mode of payment for per diem...	Taxes	1	07-23-2004 05:44 AM
Per Diem jbk@piasystems.com: We're thinking of implementing a per diem scheme for reimbursing employees and contractors who travel for our company (an S corporation). It looks...	Taxes	1	11-09-2003 06:21 AM
W2 and Per Diem John: I'm getting a contract that is located 150 miles away from my home, but in the same state. I was told that they can only do W2 with me, no 1099 or...	Taxes	10	07-27-2003 07:17 AM

Thread Tools
Show Printable Version Email this Page
Display Modes
Linear Mode Switch to Hybrid Mode Switch to Threaded Mode