Don't understand take home pay

[cincin1222]

Hello all,

I am new to this traveling language, and I am confuse about what I will be actually getting pay.

first, can someone tell me the difference between housing stipend and or getting free housing where the agency provide you with it. example, agency's offer $2200 for housing since they will provide housing for me, does it mean they will add whatever it comes to weekly to my hourly and per diem pay?

my rep told me that my package is an equivalent of $57/hr .. but I am having a hard time understanding where she is getting it from

here is the package:

hr pay rate:$31.50

taxable rate $22.09

non taxable $35/day

$500 car rental.

housing $2200

she is telling me my take home pay is about @$1400 /wkly after taxes

and that's for MA,

can someone share some light on this for me

[ParalyticAgent]

Basically it's illegal.

Can't wait to hear your explanation of this.

How is reimbursement for duplicate housing expenses illegal?

[Crazynut]

Wage recharacterization is illegal. It's when the travel company takes money from your taxable hrly rate and shifts it to tax free housing meals. Of course this is industry standard but its still illegal. You can google it. Many articles about it. Alot of nurses dont realize that its wrong. But you cant cheat uncle sam! He wins everytime!

[Crazynut]

http://www.irs.gov/PUP/businesses/RR201225.pdf

this explains it. It uses a travel nurse as an example. There's also really good articles about it on bluepipe. People go crazy with this tax free money. It doesn't work that way. The IRS has set limits to keep it in check.

[NedRN]

Wage recharacterization is illegal. It's when the travel company takes money from your taxable hrly rate and shifts it to tax free housing meals. Of course this is industry standard but its still illegal. You can google it. Many articles about it. Alot of nurses dont realize that its wrong. But you cant cheat uncle sam! He wins everytime!

Employers are free to pay any wage without oversight by the IRS (as long as they follow minimum wage). Tax free stipends are regulated by the IRS in terms of accountable plans by employers, business purpose of the employee, and maximum rates that may be paid (utilizing the current GSA geographical rates for housing and M&IE, and the current published IRS mileage rate).

Wage recharacterization is illegal for employers. It cannot by definition be the fault of the traveler employee. All penalties and back taxes would be paid by the employer, not the traveler. You posted a link to example how employers might be found guilty, but largely speaking wage recharacterization is technical and hard to prove. Not that it matters as it is an employer liability.

The only jeopardy travelers incur are for those travelers who claim false eligibility for tax free stipends. To be eligible, you have to be traveling away from your legitimate tax home on business (the travel contract) temporarily, and far enough away from home that you cannot return home to rest between shifts.

So called "tax advantage" was first implemented in 1992 and has been utilized by agencies for the last 23 years consistently. Currently there are around 400 agencies that do nurse travel contracts, and around 20,000 travelers that perform on them, apparently including you. All 400 agencies give their qualified travelers tax free stipends (or housing). Over the last 23 years, many agencies have been audited by the IRS, and they still pay travelers tax free stipends (or housing). That is rather telling, isn't it?

That is a long way from:

Basically it's illegal. It's a way to cheat the government out of taxes.

There is nothing illegal about minimizing taxes. Calling a long established practice vetted by the IRS illegal and cheating is a big stretch.

[cincin1222]

Basically this is what my contract consist of, I decided not to go ahead with it because financially is a big cut back for me especially the fact that this contract is for the Boston area I think I should have a take home pay of $1100 minimum a week not $800 especially I was offered the same position at the same hospital making more but I couldn't get submitted again because I was submitted the first time without my permission.

Regular Rate: $21.09

On Call Rate: $2.50

Charge Rate: $3.00

Call Back Rate: $31.64

Holiday Rate: $31.64

Meals & Incidentals Per Diem Rate: $35.00/day

Per Diem Adjustments: Up to $769.71/r week per diem may be adjusted based on number of shifts missed

and yes only $500 car rental/ travel expense to and from assignment

[Crazynut]

It's pretty clear. Did you read the example? Employers are not allowed to take money from taxable rate and shift it into tax free money. For example, I had one company that told me she could take $1 from my taxable rate. Give it as housing. Tax free money is for housing MI. Yet companies use it to replace money that would normally be taxable income. The link clearly explains this. You are giving out false info. Several companies have been busted for this. The travel nurses that work for these companies can then be audited. You can google it and find out for yourself if you dont believe me. Maybe we should have TravelTax come on here and explain it. This is a very important issue that every travel nurse should understand. Be careful with companies that offer $10 but $2,000 tax free money. That's just asking for trouble.

[Crazynut]

7 Things to Know about Travel Nursing Pay & Wage Recharacterization

here is another link that explains is a little better. Nothing wrong with getting tax free money when you have taxable home. But there has to be limits. Otherwise travel nurses could make min wage. But thousands in tax free money. Uncle Sam is not going to be too happy about that. Also note that a low taxable hrly rate will effect social security payments in the future.

[Crazynut]

NedRN can you site a source? All my sources say that it's illegal. I have several friends that are lawyers. I always have them look over my contracts. All of them have warned me to be careful about wage recharacterization. We even discussed case law on this topic. I'm really confused as to where you get this info. This is an important issue and I do not want nurses to be misinformed.

[NedRN]

I've already agreed that wage recharacterization is illegal. That is an employer liability. I've again added emphasis for your benefit. While negotiating with agencies to get more tax free money is indeed shaky legal ground, it again does not affect the traveler. If the tax free stipend exceeds GSA allowable amounts (which I've never seen), then yes, the IRS can require the agency to adjust the W-2 and report it as taxable wages. Penalties would still go to the agency and the traveler would still just pay the taxes. It is sensible to get paid as much as possible with the lowest tax burden, just like a hedge fund manager does.

So perhaps you can tell us what is reasonable right down to the dollar when paying legal tax free stipends becomes wage recharacterization and how that can lead to trouble for individual travelers? Right now, what is the purpose of attempting to scare travelers with industry standard practices that have survived many agency audits? I would suggest you argue those practices with agencies, they might appreciate you setting their tax lawyers and accountants straight.

[Crazynut]

http://www.traveltax.com/TaxEdArticles/TravellingTaxRelated/Tax%20Issues%20HC%20Staffing.pdf

"The primary issue is the re-characterization of wages," said Joseph Smith of TravelTax LLC. "That is an illegal tactic, which from acompany perspective, exposes you for an audit, and from an industry perspective, because this has become more acceptable for ameans of practice, presents an industry problem." Smith, formerly a traveling respiratory therapist and also an accountant, specializesin traveler tax returns and is also a tax consultant to healthcare staffing firms.

The firms that are the worst offenders, according to Smith, allow their recruiters to freely add tax free and subtract taxable in order toentice the traveler to take the contact. "This is a blatant recharacterization of wages. The IRS does not see reimbursements and salarymingling."Using the per diem allowance inappropriately can also negatively affect the traveler as well. "On the traveler end, you think a traveleris going to be able to buy a $200,000 house on $20,000 of reported income?" Smith asked. Disability, workers comp, social security,and the ability to buy a house, are all affected.Warrick also expressed his concerns, "Travelers are generally single and in the 25% tax bracket, so if you fail to report compensation,the tax assessment would be the 25% federal income tax which is about 8% Social Security and Medicare, and then penalties andinterest on top of that. The fines can get quite hefty."

[Crazynut]

Do not mingle wages and reimbursements – they are separate componentsHourly per diems are problematicWages are paid for work - reimbursements are paid for expenses incurred in performing the work. Hourly per diemsshould be avoided as they are daily rates. If paying per diems based on hours worked, clarify that the amounts are adaily reimbursement and not a wage. Penalties for missed time should be in the form of claw backs,” not in the formof forfeited hourly per diems. Hourly per diems are not completely disallowed when they anticipate the actualexpenses of the employee (Worldwide Labor Support of Mississippi v US) but the practice invites unnecessary IRSscrutiny and conflicts with the goals of state labor and unemployment boards. Tres Regs §1.62-2(j), Example 2,Gagnon v United Technisource, May 2010.

From TravelTax. When nurses engage in illegal practices they can be held liable. End up owing thousands in back taxes. Now none of this matters unless you get audited. But I just want everyone to know the risks associated with this business. I have two friends that were recently audited one was a staff nurse other a waitress. Staff nurse was good. The waitress not so much. Audits do happen and it can be devastating if it doesn't work out in your favor.

[Crazynut]

Consistent with legislative history, the preamble to Treasury Decision 8324, 55 FR 51688, 1991-1 C.B. 20, 21 (1990), states:

Some practitioners have asked whether a portion of an employee's salary may be recharacterized as being paid under a reimbursement arrangement. The final regulations clarify that if a payor arranges to pay an amount to an employee regardless of whether the employee incurs (or is reasonably expected to incur) deductible business expenses or other

bona fide

expenses related to the employer's business that are not deductible, the arrangement does not meet the business connection requirement of § 1.62-2(d) of the regulations and all amounts paid under the arrangement are treated as paid under a nonaccountable plan.... Thus, no part of an employee's salary may be recharacterized as being paid under a reimbursement arrangement or other expense allowance arrangement.

Agencies should be asking nurse where they plan on living while on assignment. If the nurse has family in that area and plans to crash with family for free, that's asking for trouble. ACTUAL expenses must be incurred to receive the tax free per diem. Also note that employers are NOT allowed to determine taxable hrly rate willy nilly. Taxable hrly rate must be consistent with local market and comparable to rate travel nurse made back home at perm position. You are giving out misinformation. It amazing how many people try to cheat their way out of paying taxes. Taxerpayer money goes to many vital programs and services. Head start, vaccine programs, schools etc.