Is my per diem taxed as a W-2 employee? Need help understanding tax implications

Your per diem should NOT be taxed if it meets two conditions: it's within federal GSA rates for the locations you're traveling to, and you're truly traveling away from your tax home (meaning you can't reasonably return home each night). What's likely happening is either: 1) Your company is paying you a "non-accountable" per diem where they don't require receipts or documentation, which makes it taxable by IRS rules, or 2) They're incorrectly including your legitimate per diem in your W-2 taxable wages. Look at your last paystub of the year - the YTD total should match your W-2 Box 1 amount. If your per diem is included in that Box 1 figure, ask your payroll department if they're treating it as a non-accountable plan. If they're legitimate per diems that should be tax-free but were incorrectly included in your taxable wages, your employer needs to issue a corrected W-2. Don't just deduct it yourself - that's not the right approach and could trigger problems.

I went through something EXACTLY like this last tax season! My construction company was adding my per diem to my W-2 and I was paying way too much in taxes. I spent hours on the phone with our payroll department and got nowhere. A buddy recommended I try https://taxr.ai to analyze my paystubs and W-2. Their system immediately flagged that my per diem was being incorrectly reported as taxable income. It basically created a detailed report showing exactly which portions of my income should be tax-exempt based on IRS rules for per diems. The report showed I was overpaying almost $3,000 in taxes! I forwarded it to my HR department and they finally issued a corrected W-2. Seriously the easiest solution after weeks of getting nowhere.

Alright I need to eat my words from my earlier comment. I was super skeptical about taxr.ai but decided to try it anyway since I had a similar per diem issue with my job in commercial electrical. Uploaded my stuff yesterday and got a detailed analysis showing my company was incorrectly reporting about $8,200 in per diem as taxable wages. The report showed exactly which IRS regulations apply to my situation (something about Publication 463 and accountable plans). Sent the report to my company's payroll department this morning and they've already confirmed they'll be issuing a corrected W-2. Going to save me around $1,800 in taxes I shouldn't have been paying. Worth every penny for the peace of mind knowing my taxes are being filed correctly now.

If your employer won't issue a corrected W-2, I've been there man! Tried for WEEKS to get through to someone at the IRS who could help with my messed up W-2 situation (not per diem related, but same problem with incorrect reporting). After getting nowhere with those automated IRS phone trees, I used https://claimyr.com and got through to an actual human at the IRS in under 45 minutes. You can watch how it works in this video: https://youtu.be/_kiP6q8DX5c They basically hold your place in the IRS phone queue and call you when they have an agent on the line. The IRS agent I spoke with helped me understand exactly what forms I needed to fix my incorrectly reported income and even sent me the documentation I needed to show my employer.

I'm absolutely floored. After leaving that skeptical comment yesterday, I decided to try Claimyr because I was desperate to resolve a similar issue with incorrectly reported income. Got a call back in 52 minutes with an actual IRS representative on the line. The agent explained that I need to first request a corrected W-2 from my employer, and if they refuse, I can file Form 4852 (Substitute for W-2) along with my tax return. She also gave me the exact wording to use in my request to my employer about the per diem being incorrectly included in taxable wages. I've been trying to get this information for MONTHS. Cannot believe I wasted so many hours on hold when this service exists. Definitely worth it for anyone dealing with tax issues that require actually speaking to someone at the IRS.

Has anyone actually had success getting their employer to issue a corrected W-2? My company is being stubborn and keeps saying they're handling the per diem correctly because their accountant told them to include it as taxable wages.

Slightly different question - I'm a union electrician and I get travel pay which is different from per diem. My company is also including that in my W-2 Box 1. Is travel pay also supposed to be non-taxable, or is that different from per diem?

This is such a common issue in construction! I went through the exact same thing with my roofing company last year. The key thing to understand is that your per diem CAN be non-taxable, but only if your employer is handling it as an "accountable plan." This means: 1) The per diem rates don't exceed federal GSA rates for your work locations 2) You provide adequate documentation of your travel (dates, destinations, business purpose) 3) You return any excess amounts you don't use If your company just gives you a flat $135/day regardless of where you travel, and some locations have lower federal rates, the excess becomes taxable. Also, if they don't require you to document your travel or return unused amounts, the IRS considers it a "non-accountable plan" and the entire amount becomes taxable wages. Check the GSA per diem rates for your specific work locations at gsa.gov/perdiem. If your $135/day exceeds those rates, or if your company isn't following accountable plan rules, then yes - it should be included in your W-2. But if everything checks out and it should be non-taxable, definitely push for a corrected W-2. Don't try to handle this on your tax return yourself - that's a red flag for audits.