Processing per diem

Julie Alexander Updated by Julie Alexander

What is per diem?

Per diem is an allowance paid to employees for lodging, meals, and incidental expenses incurred when traveling. This allowance is in lieu of paying their actual travel expenses.

See also: Per diem explained here and Frequently Asked Questions about per diem

How to pay out per diem

  • Per diem can be paid to Employees as a reimbursement if certain conditions are met.
  • Per diem must be reported for Independent Contractors as taxable wage.

Per diem and Employees

Per diem payments to employees are not part of the employee’s wages and do not get reported on the employee's W-2 as long as 1. the payment is equal to or less than the federal per diem rate, and 2. the employer receives an expense report from the employee.

  • See here for federal per diem rates
  • The expense report must include the date, time, place, amount and business purpose of the trip. The employee must file the expense report with the employer within a reasonable period of time (60 days).
    [Ask your workforce lead for an expense report template, if needed]

As long as both of these conditions are met, the per diem to the Employee can be processed as a reimbursement.

Please coordinate paying per diem to employees as a reimbursement with your Workforce Lead as part of payroll.

**If any of these requirements are not met, the payment is taxable to the employee. If the per diem was processed as a reimbursement, a payroll adjustment will need to be made in order to make the per diem taxable.

Per diem and Independent Contractors

Per diem must be reported to Independent Contractors as taxable wage on the 1099-NEC. They can deduct per diem costs on their taxes as a business deduction, subject to any applicable limitations.

See also: How to code expenses

Please coordinate paying per diem to independent contractors as taxable wage with your Financial Operations Lead.

How did we do?

Employee reimbursements

ArtsPool Retirement Plan