Can anyone explain to me how tax advantage program works? I am so confused. I have spoken with some travel nurses at my hospital but still need clarifcation in the simpliest form.
I have heard that for example... A hospital will pay 30/hr, agency looks to see what government per diem rates are for the area you are going. Ex. 115/night lodging, 50/day meals. So you make 30/hr for 36 hours = 1080 + 115 x 3 nights and 50 x 3 = 495. You are taxed on 1080 but the 495 is tax free. So your per hour rate is 43.75/hr.
Then, I've heard a few other ways which I can't remember. This is my dilemma. One travel nurse that travels to my hospital states that according to her taxes at the end of the year it looks on paper like she only made $60,000 when she really made 90,000 because the 30000 is non-taxable. Which I understand but how do you prove that you spent $30,000 on living expenses so you don't end up paying taxes at the end of the year. Ex. She gets paid per diem for 7 days/wk, she stays here locally with a friend (for free) and drives back to her home for the remaining four days. So, literally she has no living expenses whatsoever, just gas and meals. She says she does not end up paying taxes on her $30,000 because its tax free and she can pocket the money.
However, my tax guy who has done my taxes for numerous years does not understand this and I don't understand it enough to explain it to him. He says you should get a 1099 for your tax free money at the end of the year...if the traveler can prove you spent "x" amount of dollars through receipts, etc. to match the amount listed on your 1099, you don't pay any taxes. If you fall short...you pay taxes on the rest.
What I don't understand, How does so many travelers get by with not reporting their expenses especially when you stay for free or you are not spending as much as the gov. allows you? How do you not pay taxes on it at the end of the year? It does not seem worth it to do travel to make more money, if you're still having to pay taxes at the end of the year or you're having to spend the exact amount your company allows you.
Is there a way around it?