P. Murphy & Associates, Inc.
Per Diem Features & Benefits
What is a Per Diem?
Per diem is an IRS designated daily rate available to employees who
work at a location that makes it necessary (in the employees opinion)
for them to spend the night away from home at commercial lodging instead of
returning to their residence. Standard per diem rates depend on
the location where you are working.
The standard rates are set up to cover all lodging, meals, and
miscellaneous expenses associated with being away from home. You do not
have to spend all or the majority of the standard to qualify, nor do you
get the difference if on some days you exceed the per diem rate.
How far from home do I
have to be working to qualify for a per diem?
There is no restriction in number of miles between the location you are
working (staying) and your residence.
How does using
a per diem benefit me?
A portion of your gross income is reclassified as per
diem, therefore that portion is now tax exempt income.
Note: At P Murphy 'per diem' does not mean extra pay, but is strictly a
reclassification of the portion of your taxable income that has now been
designated as non-taxable.
What are Per Diem rates at my new work location?
Use the
following link to the IRS site to view the IRS Per Diem rates.
http://www.irs.gov/pub/irs-pdf/p1542.pdf
How do I qualify for a Per Diem while I work
at P Murphy?
The
below is a summary but will change to reflect any new IRS regulations
1) You must spend the night away from home at commercial lodging that you pay for
that are not your residence.
2) IRS states that you can qualify for per diem
for not longer than 12 months.
3) Request and sign the P Murphy Exhibit A Employment Contract which
describes and defines per diem for P. Murphy employees. This Exhibit must be signed at employment onset
or when some
significant event occurs makes per diem plausible.
4) PMA must receive a copy of your lodging receipt(s)
for the nights you are claiming before processing the per diem in
payroll. We do
not want any receipts other than for lodging.
5) You must notify PMA on your timesheet, number of
days you qualify for a per diem.
Example:
Joe Smith, lives in
Irvine and accepts a position in Woodland Hills for $50 an hour. For a
two week period, Joe works 80 hours and during this period Joe spent 10
nights at a hotel obtaining a lodging receipt that shows those nights.
(Note: The standard per diem rate for Los Angeles (Woodland Hills) is
$149 per day.)
Joe's gross pay biweekly is $4,000 ($50 per hour X 80 hours)
Joe's per diem for the 2 weeks is $1,490 (10 days
X $149 per diem daily rate)
The taxable gross
is calculated by subtracting the per
diem portion from the total gross pay: $4,000 - $1,490 = $2,510 taxable base.
Federal, state and
local taxes are calculated on Joe's calculated taxable base of $2,510.
Total
payroll taxes for Joe on $2,510 are $610.
Joe's net pay would be $2,510 – $610 (tax total) = $1,900
Joe's payroll check amount
is calculated:
Add the untaxed per diem amount $1,490
to the net pay
$1,900
resulting in a payroll check for
$3,390
For Joe, if
the entire gross pay was taxed in this example, the payroll check would
have been $2,745, so tax savings for the two week period for Joe was
$645.
Taxes calculated will vary based on the number of
deductions claimed on the W-4 form and by the published payroll tax
tables for the year. |
