As the employer, I paid my employee per diem allowance for her expenses during travelling (during the time she was away from her home while on the project) as per the IRS directions.
The daily amount that I paid was within the federal per diem rate limits and I have received expense reports as instructed on the IRS page. These payments have not been included in my employee's wages and as a result on her W2.
My question is, how do I deduct these per diem payments on my business return?
Per diem is allowable for assignments shorter than one year. Since her project was for almost eleven months, the total per diem paid is a large amount at the end and I do not want to raise any flags even though I followed the IRS directions and limitations. I understand there isn't a specific location for per diem and I will need to distribute it towards different categories such as travel, meals and maybe a few more preset categories as you have suggested.
By the way, how do I create a new category under the business expenses in the Business version? Is it through "All other expenses" and then I manually write the description?