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You don't have to use per diem, you can reimburse your employees against actual receipts and expense report. Or you can give them allowance per day that is less than the per diem and if employee spend more he can claim the difference on their personal return. But if you give him an allowance that is higher than the per diem you will have to report it on his w2 as income and he may deduct the actual cost (or actual per diem) on his personal return.
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