Taxed vs Non- Taxed Hourly Wage

suzanne4, RN · Jan 18, 2007

What your agency is doing is adding in the amount that you get as a per-diem amount that you allowed to take per IRS. It should not be added to your salary, but is something that you can take.

If it is added in like that, then you lose the per diem that you can take. Suggest that you speak with your tax advisor.

tenexe · Jan 20, 2007

A lot of these are scams that work out for the benefit of the agency more so than for you. As a traveler you are only entitled to this benefit if you have a permanent tax home. If you do then read on.

There are 2 ways that they will do this. one is that they will only tax part of your income and the other is that they will give you an extra allowance on a daily basis that is tax free. The government sets a varying rate on how much you can deduct at the end of the year depending on the cost of living in the area where you are living. Many agencies only add this extra money to the days that you work and not your days off. The government allows the deduction for every day that you are away from your tax home. So if you are working 3 days out of 7 you are missing 4 days that you could deduct at the end of the year. hope you follow.

The other thing that they will do is offer to only tax part of your income. for exampl example they tell you they will only tax a percentage of the hourly rate which we will say is 30.o0 hour. Say they only tax 15 dollars of that 30. According to the government you are only making 15 dollars an hour. Now its true that you may increase your takehome pay at that moment but consider that if you work overtime at time and a half you will only make time and a half over a 15.00 hour salary not 30. because of the lower salary the agency doesnt' pay as much into social security, disability, etc. but you have to realize that your long term social security benefit will be affected since social security at retirement is based on earnings. the other thing to consider is that if you get injured on the job your disability payment which is usually a percentage of your salary will be based on that 15.00 hour. the verdict is also not out with the irs as to whether this is even a legal way to get paid and could make you more of a red flag for the IRS. You can still claim all these deductions and because the per diem deductible may well exceed your standard deduction you will find that all your other deductions that you are able to claim will have more value. sorry this is so long and i hope it makes sense. I would strongly recommend a tax advisor. One agency that I have spoken to and who will be doing my taxes next year is http://kobaly.com/ kobaly. I called and spoke with them they were extremely helpful and friendly. they also specialize in travelers so they will be able to do the best for you as far as maximizing your deductions. and no I don't work for them I just called them last week with some of the same questions that you have as I am preparing to do my first travel assignment. Very nice people, and very helpful.

caliotter3 · Jan 20, 2007

Just reading these posts (as well as some of the others warning about the pitfalls of traveling) makes me want to not consider traveling as an employment option. This info gives me a headache.

Dianevin3rn · Jan 21, 2007

Thanks for taking the time to reply. Good info.

tenexe · Jan 25, 2007

Just reading these posts (as well as some of the others warning about the pitfalls of traveling) makes me want to not consider traveling as an employment option. This info gives me a headache.

I felt really overwealmed at first also. In time as I've begun to get more information and understand it there are some good opportunities out there but its not a easy way to make money without understanding all the details and knowing how to negotiate the waters.

zipporah · Jan 26, 2007

I am traveling locally now and so took my stipend as wage because it isn't "free" to me now, I live in my home. I pay tax on that stipend while I am at home. And I pay more tax when it is a stipend than when it is part of my wage. If you can legally claim that you are maintaining a second residence, it is better to recieve your stipend tax free.