- 0Nov 12, '12 by Mitts78How is "tax home" accounted for? I've read a number of articles...I seem to "get it" than lose it. Is there a time when you cut ties with your current "tax home" and reside in another one? Is there a "policy" of sorts for doing such things?
1) Is it just better to keep my current state my "tax state"? even if I rent? I have no real ties to my state, other than supportive friends.
2) Is there a benefit from "moving" states before I start traveling? I think my idea would be to get a VA license and have a compact state license...could I do that while remaining in my current state with my current license? I am assuming I could because I have neighboring friends who have duel licenses and they live in one state and work in another (or both).
3) If I did this, I am assuming I would need to use a friend's address in that state? As oppose to a PO box...as I do not think you can have a DL with a PO Box? or a nursing license?
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- 0Nov 13, '12 by NedRNIf you get audited for any reason, the IRS is going to examine your tax home closely if you accept tax-free money or take deductions for working away from home. Do you really live there? Do you have roots: friends, family, church, doctor, voter registration, drivers license, car registration? Do you return home regularly? Do you work there (not required but highly recommended if you are weak elsewhere)?
Where you want to live is a personal decision, but you will need a place to which you can return at anytime to lodgings. Prove rent or ownership, and not have rented it out while you are traveling.
Only if you have a permanent residence (different from a tax home) can you "own" a compact licensure. Yes, you can keep your current state license no matter your state of residence. If you are working with a clean slate, you might want to consider a state with no income tax. Both Texas and South Dakota have no income tax and are also compact states. South Dakota can be extremely cheap to buy a decent house and set up camp.
The requirement to actually live somewhere means a PO box won't work. It may work for a compact state license though, as long as you don't establish a permanent residence in another state.
There is nothing wrong with being itinerant (without a home) either. You won't be eligible for tax free housing, per diems, and travel, but you won't have to maintain a home either. Or worry about an IRS audit. I find that crunching the numbers works better for a well set up tax home (for example rent or buy a home and get a roommate to pay for most of the costs and check mail) versus itinerant, but your mileage may vary.
- 0Nov 13, '12 by Mitts78So I would consider myself an itinerant traveler? As I probably won't come back to this state unless to visit, etc. My other question would be about my car...do I keep it with this current state? Or do I have to re-register it every 13ish weeks with whatever state I am in? That just seems like a PITA...
I spoke with a recruiter the other day and she was leaning towards me having a "tax home" somewhere...do I gather a traveler having a tax home would save the agency money? Not that would bother me because I want to do what is right and legal, not what would save someone money.
- 0Nov 13, '12 by NedRNYou need some sort of nexus. You don't have to go all the way to the standard of a tax home, but a permanent address will work for car registration and such, and get you a compact license.
Yes, a tax home saves money, that is how they can pay you more. Housing, per diems, and travel would not be subject to income taxes, but also not subject to FICA, workers comp, and unemployment - reducing those costs by about 10 percent over taxable reimbursements.
Whether it actually saves the agency money is up to interpretation. They are competing with many other agencies for travelers and have to pay a competitive wage and still make a fair profit themselves. Again, a limited pot (the bill rate) in which to pay for everything. If one agency quotes you pay based on a tax home, and another based on itinerant status, you will not likely be interested in working for the latter. So they have lost a competitive edge.