Rev. Rul. 2012-25 says an arrangement that recharacterizes taxable wages as nontaxable per diem fails the accountable-plan business-connection rule. If you'd receive the same total pay whether or not you travel, the "per diem" is wages. Situation 2 of the ruling describes a nurse staffing company.
What it means for you
A very low taxable rate isn't illegal by itself. But it lowers your Social Security earnings record and any overtime pay based on the regular rate. It can also lower unemployment or disability benefits. And it draws attention if your tax home is weak.
Ask the agency: "If I take a local assignment, how does my pay change?"
Gray areas
There is no IRS percentage test.
Go deeper
Rev. Rul. 2012-25 specifically describes a nurse staffing firm that pays nurses the same gross compensation whether or not they travel, and simply labels part of the hourly pay as per diem for those traveling. That arrangement fails the business-connection requirement, and all of it is wages.
Common mistakes
Wash-rate / lowball hourly pay (e.g., taxable rate near minimum wage, the rest as stipend) that doesn't change whether or not you travelRecharacterization, so the whole package is wages. Also lowers Social Security wages and future benefits, and can cut overtime, unemployment, and disability pay.Source: Rev. Rul. 2012-25