Assuming that the payments are within federal rates and employees are providing proper documentation of travel, per diem generally does not count as taxable income. If it is in such a case, it is processed as reimbursement not as wages. In fact, if the per diem amount is greater than IRS limits or no records are kept, then the excess would be considered taxable income. In addition, if it was paid to independent contractors or without substantiation, it could be considered as income. One must know the tax consequences of your employment status and usage.
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