Travel Nursing Tax Information (That You Can’t Afford Not to Know)
For new travel nurses, travel nursing tax information can be intimidating, fear-provoking, and at some point, discouraging. Imagine being overly excited to explore the world while fulfilling your noble profession as a travel nurse, only to hear harrowing stories of fellow travel nurses who have gone through the convoluted and lengthy process of filing their taxes at the beginning of the year. On top of that, you discover how some of them have lost money and opportunities because they were not able to satisfy the requirements set by the IRS to quality for non-taxable expenses that they were eligible for. Even worse, those who did not anticipate a lower annual income that resulted from not knowing what their chosen payment scheme and compensation rates entailed, were burdened by their inability to get approved for financial loans, as well as increase their contributions to their retirement funds such as Social Security, among others.
But you don’t have to pack your bags and change careers yet. There are many ways to get yourself geared up and ready to tackle tax filing season as a travel nurse.
Knowledge is power
Travel nursing and filing your taxes does not have to be difficult and you certainly don’t have to lose sleep or the motivation to become a successful travel nurse just because other people did not have a positive experience with it. While it’s true that the process of filing taxes for travel nurses is more intricate than that of a regular nurse, being educated, well-informed and prepared for what you need to accomplish during tax filing season will help you go through the process easily and with favorable results.
To be fully prepared, you need to make the necessary steps to ensure your own experience is easier and rewarding. Sometimes, preparation takes place all year long to comply with certain IRS requirements. Oftentimes, how you set up your employment with your employer before you start your assignment is a big key to achieving the benefits you deserve and are eligible for when it’s time to file your taxes. Talking with your employer is a must to better understand the nature of your employment including the breakdown of your annual rates and compensation so you can position yourself better when you make financial decisions in the future.
If you need professional help, you always have the option to consult with or seek the services of a tax expert to ensure your taxes are properly filed.
Complying with IRS regulations
Being prepared for battle means knowing what you’re up against. In this case, you are bound to comply with IRS regulations that specifically address the terms governing individuals working away from home including travel nurses. You can read the full IRS regulations by clicking here.
What you can’t afford not to know
How you file your taxes will determine your eligibility for tax-deductible expenses based on your employment arrangements as a travel nurse. There are basic things that you need to know to be able to accomplish the process accurately that will ensure your financial investments are not compromised.
While working as a travel nurse, you will incur travel expenses that are considered tax deductible. These expenses include your transportation fares when you travel to and from work including baggage and shipping fees, car rentals, tolls, mileage and parking fees as long as they are related to your business as a travel nurse. Your meals, lodging, laundry services, business calls, office supplies, licensing and training fees, as well as tips and other incidentals used for business purposes related to your employment, are also considered tax-deductible.
Tax Home versus Permanent Home
To be eligible for tax deductions or breaks, the IRS requires that you maintain both a tax home and a permanent residence. According to the IRS, your tax home is “the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home.” As a travel nurse, your residence while working is considered your tax home. Your permanent residence is the home that you maintain and go back to after each assignment that you have not abandoned. In other words, while working as a travel nurse in your destination of choice, you are still paying your regular bills for your permanent residence whether it’s occupied by your family members or not. Compare yourself to professional athletes that travel the country to play sports. The city that they play at is considered their tax home. However, they maintain permanent homes with their spouses, children, and relatives in their permanent residences that they go back to during game breaks such as holidays and vacations. If you do not have a permanent residence that you maintain, occupied by you and your family members, then the IRS will consider you as a transient. Being a transient does not qualify you for tax-deductible expenses.
Length of Stay in your Tax Home
According to the IRS, “any work assignment in excess of one year is considered indefinite” and will disqualify you from filing any tax-deductible income. When you work on an assignment as a travel nurse, make sure you do not stay in your tax home for more than a year. Talk to your employer and make sure you finish your contract before you become ineligible for tax breaks. If you are working in different states for several assignments within a year, you are required to file taxes in each state.
Before you start your first assignment with your employer as a travel nurse, find out all the details about your compensation. Complete a breakdown of all the components including your per-diem, reimbursable, and stipends. Once you’ve assessed what you are earning for your entire assignment, it would be easy for you to determine your true hourly rate that excludes all the allowances designated for your lodging, transportation, fees and incidentals, and other expenses that are tax-exempt. Some employers may pay packages that are “blended” which incorporate both hourly rates and non-taxable expenses. Determining your true taxable rates will help you assess the income that will be valuable to you later on when you decide to apply for financial loans or calculate how much you need to allot for your Social Security and other retirement contributions.
Keep your Records
During your entire assignment, make sure you keep all pertinent documents related to your work. Keep a record of your mileage, hours, and other paperwork that represent your business stay in each location and establishment from Day 1 until the last day of your assignment. Make sure your contract has a beginning and an end date. The IRS has a set rate for stipends and may not reimburse you if you exceed the amount. Keeping your travel documentation, paperwork and receipts are needed for tax-filing purposes and will be useful especially when the IRS performs an audit.
Filing taxes as a travel nurse is not difficult if you have the proper knowledge and are fully prepared with the right documentation when you go through the process. It should not deter you from experiencing all the benefits that come with being a well-rounded and successful travel nurse.