Housing Allowance For Temporary Engineering Assignment 3

[EngMark]

I am a mechanical engineer with a P.E. and decades of experience in varied automotive and machine design positions. For the last 7 years I've gone out on my own in private practice doing engineering, CAD, fabrication, prototyping (I have access to an awesome shop). For the last few months business has been very slow and I'm exploring going back to a "regular job" but it won't make me very happy if I do so. An intermediate solution has come up. I've been approached to take on a 6-8 month project working for an employer in another city. It would finish and I'd return to doing what I'm currently doing and by then hopefully my clients would have more for me to do for them. If I do this I'd be responsible for my own housing in this other city (Cleveland) and for transportation (a 3 hour drive). I've given the company a rate for my work (the standard rate I usually charge, which didn't seem to meet any resistance) but then the question arose what would be the hourly rate if housing were to be included. This is outside of my area of knowledge. How should I price housing and other costs associated with being in Cleveland for months and probably going home on the weekends (which they seemed to suggest many of their people do)? This seems to be a 40 hour / week organization.

Thanks,

Mark

 

[BUGGAR]

Per diem should cover this. They give you an allowance for this, don't they?

 

[KENAT]

As Buggar says, I'd look at per diem. I believe IRS has/had guidance for typical allowance before they'd treat it as additional income.

Alternatively you could go crazy and look up the price of a mid range hotel in the area (don't forget to make allowance for prices varying between peak & off season if applicable to your local), work out typical food costs and also the additional travel expenses. On the travel expenses you could look at price of gas, mpg, additional maintenance etc. or just use the IRS mileage rate.

If a hotel doesn't grab you look at rental prices for an apartment or similar - extended stay places are quite expensive from my experience and don't make allowance for you not being there at the weekends normally so wouldn't be my first choice unless you think the client will pay the full $.

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[KENAT]

Oh, and if you have an accountant you could always consult him especially on the potential tax implications.

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[EngMark]

As for a per diem, that's kind of foreign to me. I've had a per-diem only once when working for Ford as an employee and stationed at an assembly plant, but that was set by them and set in stone. I imagine there is a table somewhere that has standard rates or per diems for major cities and the IRS table suggestion seems to say that. Where would I find such a table? Hmm, time for me to use "per diem" as a Google search term. Yes, an accountant would seem to be the way to go but maybe as a semi-last resort as I don't currently have a relationship with one and they do like their money for chatting.

 

[IRstuff]

You could use the GSA allowances:

http://www.gsa.gov/portal/category/26429

which would at least have the bonafides of the US gov. The tool coughed up $125/day for lodging and $69/day for meals and incidental expenses.

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[EngMark]

Since my last post I think we've been traveling in parallel. Here is what I wrote before I saw the post above:
__________

Well, per diem is the right search term it seems:

http://www.gsa.gov/portal/content/142071

GSA establishes the per diem rates for the lower 48 Continental United States (CONUS), which are the maximum allowances that federal employees are reimbursed for expenses incurred while on official travel.

The CONUS per diem rate for an area is actually three allowances: the lodging allowance, the meals allowance and the incidental expense allowance. Most of the CONUS (approximately 2600 counties) are covered by the standard CONUS per diem rate of $140 ($89 lodging, $51 meals and incidental expenses). In fiscal year (FY) 2016, there continue to be about 400 Non-Standard Areas (NSAs) that have per diem rates higher than the standard CONUS rate.

http://www.gsa.gov/portal/category/100120

More specifically for the Cleveland area they list hotel at $125 and (Meals & incidental) at $69 per day = $194
This seems odd to me being that its higher than the $140 standard rate and Cleveland doesn't seem like it would be an expensive area.

https://www.perdiem101.com/conus/2015/ohio

This gives a total of $175 for 2015, so in the ballpark of the above

Does this daily range of $140-$194 seem correct or am I missing something? Assuming an 7 day stay and 40 hours work that equates to a range of $24.50-$33.95 / hour. That seems more than fair to me as far as staying in Cleveland, maybe it would come out even considering that I'd then need to occasionally (every weekend or two) go between home and Cleveland. Comments?

 

[KENAT]

https://www.irs.gov/pub/irs-drop/n-15-63.pdf

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[EngMark]

Thanks for the input guys. Very quick and informative, more than I was hoping for already. Don't feel pressured to dig more but if anyone has thoughts keep them coming. Thanks.

Mark

 

[IRstuff]

If you can live on less, that's fine, but the "average" is somewhat meaningless. Cleveland is not high at all; try San Fran with $250 for lodging and $74 for meals, etc., while Des Moines is listed with $101 and $59.

Basically, any large metropolitan area will almost always have a higher per diem than a smaller city, or even a rural area. So, New York City is listed at $270 and $74.

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[TheTick]

$250/night in SF won't even get you one of the better sidewalks to sleep on.

 

[JStephen]

Note that your per diem can be higher than the "standard" rate, you just might have to figure part of it as taxable income.
They have the long-stay motels around here some, which are cheaper than the nightly rate at a normal motel, and you could probably get one for 7-days a week cheaper than a normal one for 5-days and going home.
Also check on the IRS, if they can pay 7-day per diem and not be taxable- I'm thinking they can. Which brings the average up, if you were only figuring 4/5 days a week.
Also, you'd have to check, but I think if they pay for ACTUAL expenses, the per diem for tax purposes doesn't necessarily apply.

 

[IRstuff]

Of course, GSA gets government rates at hotels, so $250 might get a government employee decent digs.

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[KENAT]

If only there were websites where you could look up hotel pricing in the area of interest and see what rates are for a ** or *** hotel etc. and get some of idea how they vary with time etc. maybe if the site had reviews from folks that had stayed there it could help decide on what is an acceptable one.

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[EngMark]

Hmm. Company confirmed that they won't pay a stand alone per diem, that it has to be baked into the hourly rate. Their reason being that prior to finding their way to me they had only been looking for and hiring engineers that were local to the project.

 

[TheTick]

Start baking.

 

[jgailla]

When you bake it in remember that per diem is tax free.

 

[IRstuff]

That's an odd way to do it, but I guess they want to see what the equivalent cost will be at the hourly rate level. Oh, one that that's often not included in the per diem is the airfare, and rental car, if you get one.

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[EngMark]

I baked.
I submitted.
They didn't like the number.
The end.

Thanks for the input guys.

 

[IRstuff]

Yeah, figured... $194/day --> ~$25/hr extra

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