Appeals ISP Settlement Guidelines
Per Diem Allowances for Temporary Technical Services Employees
APPEALS SETTLEMENT GUIDELINE
CONSTRUCTION/REAL ESTATE INDUSTRY
PER DIEM ALLOWANCES FOR TEMPORARY TECHNICAL SERVICES EMPLOYEES
1) Whether the payment of a per diem allowance or expense reimbursement to a
“temporary” technical services employee is paid under either (1) an “accountable
plan” and, therefore, excluded from the employee’s gross income, or (2) a
“nonaccountable plan” and, therefore, included in the employee’s gross income.
2) If the allowance or reimbursement is includible in gross income of the temporary
technical services employee, whether the amount constitutes wages for federal
employment tax purposes (federal income tax withholding, the Federal Insurance
Contributions Act (FICA), the Railroad Retirement Tax Act (RRTA), and the Federal
Unemployment Tax Act (FUTA)).
The Examination Coordinated Issue Paper, effective January 21, 1997, discusses a
typical scenario in the temporary technical services industry to illustrate these issues.
Following is a summary of the facts, legal analysis and conclusions reached with respect
to these issues in the Examination Coordinated Issue Paper:
Businesses in the construction, aerospace, defense contracting, nuclear power generation
and other similar industries fill many of their technical positions with “temporary”
employees provided by technical services firms, also known as “job shops.” The job shops
are employment agencies specializing in locating highly skilled technical employees,
including engineers, designers, architects, programmers and toolmakers. The duration of
the employee’s job may vary from a few days to several years, depending on the length of
the contract between the business and the technical services firm.
An employer (in this scenario, a technical services firm) gives the employee a daily
allowance of up to $50 to cover “travel expenses” associated with the job