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per diem pay and expenses

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#1 jlynn2009


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Posted 15 November 2009 - 10:13 AM

I am an employee of a subcontracting company.  One question I have is if it is legal for the company to take per diem pay off of my check so I do not get taxed on it, but not actually pay me that per diem.  For example, I get paid by the job, so say I billed $500 for jobs that week, and my per diem pay is $200 for the week.  My pay stub will show that I billed $300 and that is what taxes are taken out of.  After taxes are taken out, the other $200 I billed is added back onto my check.  The company does not actually pay any per diem pay out of their pocket, they just use it as a tax break. 

The other question I have is regarding expenses of the job.  The company made everyone employees this year (before we were contractors).  The issue is I still pay all my own expenses, work truck (required to do the job), tools, and gas.  The company says I can use them as a tax write-off, but I would be better of being reimbursed for these things.  Since I am now an employee why should I be paying for anything?  The company I work for is based out of South Dakota and I currently work in Minnesota.

#2 Fallen


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Posted 16 November 2009 - 06:29 AM

Saying you an employee and using a word like "billed" to refer to time worked on a paycheck is a bit odd.  Are you your own businessperson/freelancer or are you an employee of this company?  You may be improperly classified as an employee, or you may have been improperly classified as a contractor before.  You might want to google "independent contractor vs. employee" and read up, or discuss with state labor dept.

You also don't say what this per diem amount represents.

"The company does not actually pay any per diem pay out of their pocket, they just use it as a tax break."

If you don't actually get paid for it, then it shouldn't be on your check.  I'd file a complaint with the state and federal labor depts. and the taxing authorities.  You don't want to get hit with a big tax bill over income you do not actually receive.

Employer isn't obligated to pay for work-related expenses in most states.  CA is a state I know of that requires reimbursement for business-related expenses.  If state doesn't require it, you can deduct those unreimbursed exps. off your taxes.  You can't force the employer to agree to reimburse.  Minnesota law would apply.

I'll echo PG's advisory "warning" with a twist: (Many) legal issues are complicated. Explanations and comments here might not fully identify or explain the ramifications of your particular problem. I do not give legal advice as such (and such is impermissible here at any rate). Comments are based on personal knowledge and experience and legal info gleaned over a quarter century, and every state has differing laws on and avenues to address most topics.  If you need legal advice, you need to consult (and pay) a professional so that you may have someone to hold accountable.  Acting on personal and informational advice from a stranger on the internet is a bad idea -- at least not without your own thorough due dilience/research and confirmation as it applies to your situation.  :)

#3 jlynn2009


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Posted 16 November 2009 - 09:58 AM

I used to be a contractor for this company and filed a 1040.  However, this year the company switched us to employees, however, we still get paid by the job and not the hour.  So this year I will file a w2.  I don't think the company has everything set up the way it should be to have us labeled as employees.  I believe the company claims me as an exempt employee so they don't have to pay any overtime.  Although, I don't know if I actually qualify to be an exempt employee. 

Per diem pay is to be for traveling expenses, since we travel on the road for this company.  What I mean by not actually be paid the per diem money is that I bill for the jobs I did.  What the company claims to pay per diem is subtracted  off of what I billed for my earnings for that week.  Then taxes are taken out.  Then the amount they subtracted off of my earnings is added back onto my paycheck after taxes.  So the amount they are subtracting and adding back on is the money I originally billed for jobs I did. 

My pay stub goes like this (example)

Jobs billed (my real pay):  $600

Earnings (shown on paystub):  $400

Taxes:  -$50.00

Adjustments to net pay: +$200  (Jobs billed  minus Earnings) Labeled as per diem pay 

Net pay:  $550.00

So the per diem they "claim" to pay is just subtracted off of what they owe me and then added back on after taxes so I don't get taxed on that money.  In return, the company gets to use that per diem as a tax write off for themselves.  When it was really just part of my actual earnings for the week that they owed me. 

My boyfriend also works for this company as a manager.  They made him an employee also, on his check the company does the same thing with social security tax that they do with the per diem pay.  They take the money out of his earnings for what he billed to make it look like they paid their half of the social security tax.  When he is really paying for the employer's half of the social security tax and his half. 

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