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Losing per diem

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RAD-GHOST:

--- Quote from: Jiggie on Jul 12, 2010, 11:49 ---I was employed by a contract company in an outage starting in Sept. last fall. I was laid off and had an approx 6 1/2 week break over the holidays returning to work at the same site mid January. I was asked to stay after the spring outage with no end date quoted and no guarantees. They told me at the time, I would lose my per diem Sept 7th since I would have been on site for one year without 8 weeks contiguous unemployment. I agreed to stay with my pay rate going up quite a bit when I lost my diem.

Now, the utility is saying no go on the pay increase when you lose your diem. I told them I would be leaving to work other outages this fall since I could make far more doing that than staying here. I applied for some outages through my current contract employer who apparently had no issues with it at the time and I was accepted at one of my choices last week.

I walk in this (Monday) morning and get a call from the contract company informing me that even if I leave here and work outages elsewhere, I will still not get per-diem since I have not had 8 contiguous weeks of unemployment. At first I was hearing 8 contiguous weeks at this site. Now all of a sudden its 8 contiguous weeks in one year period and no per diem anywhere

Anybody ever hear of this type situation?


--- End quote ---

NOTICE....I think they gave you notice, but you didn't notice!

I believe it was in the same category as Juniors requiring less Per Diem to live on the road.... ::)

RG!

traveltax:
As the other posters have mentioned, so long as your company is within the IRS guidelines, they can decide for themselves how they pay per diems and at what point those payments become taxable due to your length of stay. A company can follow a stricter interpretation of the tax code if they wish.

The tax code and related authority are clear that you must be away from your tax home (which is not a permanent residence by the way), overnight and engaged in a temporary job assignment to qualify for tax free per diem/stipends/allowances etc. Your tax home can shift once you have committed to staying beyond 12 months or due to repetitive and frequent engagements in the same area. These rules are only by exception as empirically, a tax home is where you make your income- not where you live. Where you live can be your tax home given the above is followed along with the other criteria that make up the set of exceptions.

In other industries that employ temporary staff, there is a constant struggle in defining when an employee’s tax home shifts and how to address this is a manner that will pass an audit. If the IRS where to find fault in a company’s reimbursement program, they would be subject to some heavy penalties. In all my years doing tax work in the contingent staffing industries (temporary staff companies), this is not the first time I have heard of a requirement of a period of unemployment. I have seen other companies require a 30 day break from any employment each year or a 45 day break every two years. I have never heard of something specific as your issue requiring an 8 week break of unemployment. Once you approach a year in service, you need to go elsewhere and have a significant break from the area. IRS chief counsel has indicated that 7 months is the minimum time allowed for another 12 month engagement.

The one issue that needs to be dealt with is your statement: “I was asked to stay after the spring outage with no end date quoted and no guarantees”.  Since there is no end date in sight, you have taken a permanent position. It may seem temporary to you, but contractually, this is an open ended, indefinite arrangement in the eyes of an auditor and a shift in your tax home to the area where you are working. If there is an understanding that this is a temporary job lasting less than a year, then we can look at this as a qualifying engagement. Of course, you must take into account your past service in this area as well.

I get the feeling that everyone involved in your situation is not communicating on the same terms. Does unemployment mean an absence of labor or a break in service? Do the additional people involved understand what the others already said? If possible, you may want to get a third party involved who can sift through the verbiage. I have often called recruiters on behalf of my clients for that reason.

Rennhack:
Joe,

I sure am glad you are here.  I think your understanding on the subject rivals ANY other person I have met.

It seems that we may not like the truth, but there it is.

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