Itinerant traveler help

NedRN · May 21, 2016

A tax home and a state residency are two different things and defined differently by different state and federal agencies. It is possible that a post office box and possibly paying appropriate state income taxes will make you an official state resident for many purposes, including for compact license status. However, it is not clearly defined, and it might be tough to get a letter validating your residency status from a BON. The reason I bring up a letter is that I've heard denial of a compact license after verbal confirmation that it was valid.

Having a state nexus (P.O. box or other address of convenience such as a friend or relative, drivers license, et cetera) may indeed qualify you for a valid compact license, but it doesn't change your itinerant tax status. You still must pay taxes on all your compensation (other than reimbursements for professional expenses such as licensure), including per diems, housing stipends, or the full value of provided housing. Only if you establish a full time residence (housing) that you can return to at any time (a house share would do it with a bedroom that is just yours), demonstrate you have expenses in maintaining it (rent, mortgage, taxes), and return to it "regularly" (the IRS guidance on how often), can you legally not pay taxes on those "duplicated" expenses that your agency reimburses you for (housing, per diems). But you can't just "use" an address of convenience without those details in place (and perhaps a few other things - talk to a travel tax professional).

Having a tax home is no small matter but can result in $20,000 a year higher net income (in the bank). If you can pay less than that amount for housing, and will be a full time traveler, you will come out ahead at the end of the year. Having a tax home in a compact state clearly makes you eligible for a compact license as an additional benefit.

As described in your post, you are working without a license right now. You certainly need to take action. You might tell Colorado that you have moved to Colorado when applying for a license. They will issue a compact license and when you leave Colorado, tell them you are moving and please revert to single state licensure. Alternatively, you could tell Colorado the full truth and throw yourself on their mercy (they will probably tell you that you need to stop working immediately until you have a valid license). I will say that the Texas BON will not go easy on you should they find out and telling the truth here might prove very harmful if CO tells TX. Yet telling the truth is safer in some ways, but the prior suggestion should be low risk as you are allowed to move between compact states and have a grace period to apply for a license from the new state.

Good luck! As an aside, a compact license is not all that wonderful for travelers. Compact states pay less - greater supply of travelers means lower pay. It is convenient, and reduces some hassles and expenses, but if you get paid less, it is not worth excluding non-compact states when you are looking to establish a nexus. There is no need to hold a local state license where you live, but should you work where you live, this does help establish a solid tax home. (A tax home is merely a preponderance of evidence, but working at home is one of the three legs of a tax home - but you only need two of them).

Emster83 · May 22, 2016

Thank you Ned! Appreciate the input.