Should I pay tax on per diem income?

If your per diem is taxed depends on the wages comparison, plus if the IRS determines it is taxable. Assuming federal rules aren’t broken and staff members provide the needed papers, the allowance isn’t usually taxed. On the other hand, anything you receive over the IRS limit or don’t properly track can be seen as taxable income. Both employers and employees should know and follow the rules about per diem taxes.