Originally Posted by
hercretired
Per Diem is an allowance purposed to cover costs directly associated with travel, such as food and other expenses.
Compensation is pay given to you because you performed work.
Whether per diem is on a W2 or not is outside the scope of this forum and is more an accounting issue. If your company pays per diem more than GSA rates, that "extra money" has to be categorized as income.
Per diem payments are not considered wages, and are therefore non-taxable, as long as the payment is equal to or less than the federal per diem rate. If you receive a per diem payment that is more than the federal per diem rate, you will be required to pay income tax withholding and payroll taxes, since the excess amount will be considered wages. Your employer should report this to you on a W-2 form.
If you can contribute per diem into your 401(k) or use it to build your Health Savings Account, let me know.
Your definition of "compensation" is not correct, you get compensation and wages mixed up.
Per diem is not wages (apart from the GSA excess), but it is compensation.
https://www.merriam-webster.com/dictionary/compensation
For example, courts award damages as "compensation", and it has nothing to do with doing work.
Compensation means money paid to you, per diem by definition is that. It is compensation for out-of-pocket costs you may incur on the road.
Your wages, 401K DC or match, per diem are all compensation.
But your 401K DC or match, or per diem are not wages.