I am working for IT consulting organization in USA. My current employer pays salary on hourly basis and total salary is taxable.
I have got another offer from another Consulting Organization. New employer places their employees across client locations based on their corp-corp contracts. And based on those contracts I have to travel to those client locations and work at client location for the duration of the contract. Those kind of contracts start from 3 months to 1.5 years. Some times contracts get keep on getting renewing to years.
Hence new employer pays a part of the salary as per diem compensation along with regular salary and says that per-diem compensation is non-taxable. The regular hourly salary is less than what I am getting right now. But if I combine regular and per diem component then my earnings becomes more than the current earnings with my current employer. New employer also provides a feasibility to put entire salary as regular salary and which becomes taxable. But at the end of the day my earnings after tax would be same as what I am earning right now.
Now If I go with per diem It is benefits for me. How ever I am afraid possible legal risks with that.
Based on this context I have following questions As per US law is it legally allowed non taxable per diem compensation to employees? What are the pros and cons of having per diem compensation? If I have to report my salary to any one like banks, insurance companies, do I need to include Per diem compensation or not?