As touring crew traveling away from our homes to work we know we get per diem every week in cash or in our paycheck that is separate from our salary/rate. Many of us don’t question when being handed “free money” but… what is it really, what does it even mean and why do we get it?
Per Diem is NOT income.
Per diem is Latin for “per day” or “for each day” and is defined as – a daily allowance for expenses. That’s it! It is simply a reimbursement, not “free money”, most often to an employee to cover day-to-day living expenses when traveling for work.
→To qualify for per diem while traveling for work the IRS requires an overnight stay away from your primary residence.
→Per diem may include part or all expenses incurred i.e. accommodations and/or meals.
→Per diem can be in the form of a fixed rate or may be reimbursed by handing in receipts.
Fixed per diem rates simplify the process by eliminating the need to present/review supporting receipts as proof of expenses incurred while traveling for work.
As a common practice in touring we are given a fixed daily rate that does not look at actual expenditure. Because of this, the per diem could be taxable. This is not a common practice since most employers don’t want to be responsible for tracking and reporting it as income. The last thing an employee expects is to owe taxes on a reimbursement.
Fixed rate per diem require only that there is a record kept of substantiated time, place and business purpose of expenses. This can be done by either your employer, yourself or both. When given cash pd’s you will likely sign a dated sheet showing that you received your per diem along with the exact amount . If received in a payroll paycheck they can be added as misc. non-taxable per diem, other wise it will be seen as a part of your wage and it will be taxed. If that is your situation you’ll want to get that back when you do your tax return. Check out→ Death and Taxes for more info on that.
Depending on the location you are in the per diem rate varies.
The General Services Administration provides rates for many cities in the US as a guide. The Department of State establishes per diem rates for overseas. You can find the federal per diem rates listed in IRS Publication 1542.