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Travel Nursing: tax home

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Hi! I am a Florida RN who is planning to start travel nursing on May 2020. I don’t have a proper “Tax house” but I had planned to move my appliances and belongings to my sister’s apartment in California and, help her pay half the rent. However I was told that since California isn’t part of the multi state license (not one of the compact states), it wouldn’t count as a tax home. 
 

Can anyone share to me their experiences/ thoughts? 

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p.s. since California isn’t a compact state, will this affect my multi state license? Btw I plan on working my first assignment in Missouri.

 

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Silverdragon102 has 32 years experience as a BSN and specializes in Medical and general practice now LTC.

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Moved to the Travel Nursing forum 

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4 hours ago, wafuru said:

p.s. since California isn’t a compact state, will this affect my multi state license? Btw I plan on working my first assignment in Missouri.

Yes.  When you establish residency in CA your FL license becomes a single-state license.

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Agree, moving to California may gain you a tax home, but you will not have a compact license. I don't see having a compact license as that big a deal as you will likely make more money in single license states anyway as they tend to pay more than compact states. They tend to be union states and the board is protective of their franchise which also increases pay for travelers (fewer travelers with those licenses). So it could be a good thing to get out of the compact comfort zone.

A bigger issue could be that will have to pay California income tax on all assignments, versus never to Florida if Florida is your tax home. Yes, you also have to pay income tax to all work states (except those with no income tax like Florida), but effectively you will always pay the maximum tax rate of either the work state or your tax home state - which will usually be California now. A traveler based in FL, TX, or SD (all no income tax compact states) have the best deal. I'm in a relatively high tax state and non-compact state myself which is not optimal of course.

So in 25 years of travel, I've never met a traveler from California (or Massachusetts for that matter). The pay is so high for staff in those states (largely union), they can never pencil out the advantages of becoming a traveler. So if you find a staff job in California, you may give up on the idea of travel. Happens. Now I have often been offered staff jobs in California and been tempted, but financially, it has always been a wash for me. But I'm an unusually high paid traveler and many travelers who get offered a staff job in California take it.

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2 hours ago, NedRN said:

Agree, moving to California may gain you a tax home, but you will not have a compact license. I don't see having a compact license as that big a deal as you will likely make more money in single license states anyway as they tend to pay more than compact states. They tend to be union states and the board is protective of their franchise which also increases pay for travelers (fewer travelers with those licenses). So it could be a good thing to get out of the compact comfort zone.

A bigger issue could be that will have to pay California income tax on all assignments, versus never to Florida if Florida is your tax home. Yes, you also have to pay income tax to all work states (except those with no income tax like Florida), but effectively you will always pay the maximum tax rate of either the work state or your tax home state - which will usually be California now. A traveler based in FL, TX, or SD (all no income tax compact states) have the best deal. I'm in a relatively high tax state and non-compact state myself which is not optimal of course.

So in 25 years of travel, I've never met a traveler from California (or Massachusetts for that matter). The pay is so high for staff in those states (largely union), they can never pencil out the advantages of becoming a traveler. So if you find a staff job in California, you may give up on the idea of travel. Happens. Now I have often been offered staff jobs in California and been tempted, but financially, it has always been a wash for me. But I'm an unusually high paid traveler and many travelers who get offered a staff job in California take it.

Thank you for the explanation, Ned! 🙂 I have a cousin who currently resides in Florida. If I cannot make California my home base, can I use my cousin as my tax home? I’d just be staying over her place every now and then. But then, given that it’s her house, I would have to pay for it. Does that still count as a tax home?

3 hours ago, chare said:

Yes.  When you establish residency in CA your FL license becomes a single-state license.

🤔 what a conundrum... if I choose to make my cousin’s home my tax home, would that be ok? Although, since it’s her house, I wouldn’t be paying for it. 

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43 minutes ago, wafuru said:

Thank you for the explanation, Ned! 🙂 I have a cousin who currently resides in Florida. If I cannot make California my home base, can I use my cousin as my tax home? I’d just be staying over her place every now and then. But then, given that it’s her house, I would have to pay for it. Does that still count as a tax home?

🤔 what a conundrum... if I choose to make my cousin’s home my tax home, would that be ok? Although, since it’s her house, I wouldn’t be paying for it. 

If you maintain this as your permanent address, an meet whatever requirements FL has for establishing and maintaining residency, then yes, your FL license should maintain its multi-state privileges. 

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I agree about the compact license. The tax home is a bit more difficult and I'd recommend a free consult with Travel Tax to be clear about the details. But here is what I know:

A tax home includes a residence where you actually live (not required for your compact license). You cannot simply use an address of convenience. To survive a serious audit, you will have to provide proof, potentially including a site visit. You would need to shift all your documentation there, like drivers license, car registration, voting registration, BON (very important legal address should a complaint be filed), prove that you pay rent in the example you cited of your cousin (I'd suggest a house sharing agreement) with receipts, and a bedroom that is yours exclusively no matter when you return. Optimally, a local physician et cetera. A preponderance of evidence is the legal threshold here absent clear fraud.

While not required, your tax home would become much more solid if you could work per diem locally every once in a while. You should return home "frequently" but this is a pretty soft and poorly defined requirement. There are a number of ways to break a tax home and I'd suggest reading more on the topic on PanTravelers (pick the free registration) or Travel Tax. One is by working more than 12 months (out of any two year period) in the same general area outside your tax home - if you do, that is now your default tax home no matter the other evidence to the contrary. An example would be rotating around the San Francisco Bay area, even though you are in a different city each 3 month assignment. 

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7 hours ago, NedRN said:

I agree about the compact license. The tax home is a bit more difficult and I'd recommend a free consult with Travel Tax to be clear about the details. But here is what I know:

A tax home includes a residence where you actually live (not required for your compact license). You cannot simply use an address of convenience. To survive a serious audit, you will have to provide proof, potentially including a site visit. You would need to shift all your documentation there, like drivers license, car registration, voting registration, BON (very important legal address should a complaint be filed), prove that you pay rent in the example you cited of your cousin (I'd suggest a house sharing agreement) with receipts, and a bedroom that is yours exclusively no matter when you return. Optimally, a local physician et cetera. A preponderance of evidence is the legal threshold here absent clear fraud.

While not required, your tax home would become much more solid if you could work per diem locally every once in a while. You should return home "frequently" but this is a pretty soft and poorly defined requirement. There are a number of ways to break a tax home and I'd suggest reading more on the topic on PanTravelers (pick the free registration) or Travel Tax. One is by working more than 12 months (out of any two year period) in the same general area outside your tax home - if you do, that is now your default tax home no matter the other evidence to the contrary. An example would be rotating around the San Francisco Bay area, even though you are in a different city each 3 month assignment. 

Thanks for the clarification! I guess I’ll need to keep my apartment then in the meantime to keep myself eligible for the housing stipend and the compact license. 

if I commute to work via Uber, does that count as a traveling expense for Tax reimbursement? 

Thank you so much for your replies!

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If you are performing on a travel contract with an end date, and it is far enough away from your legitimate tax home that you cannot commute from home, and you have taken duplicated housing for that reason, and those Uber expenses exceed the travel allowance from the agency, yes, those expenses could be itemized on your tax return after subtracting the travel allowance.

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adventure_rn is a BSN and specializes in NICU, PICU.

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21 hours ago, NedRN said:

A tax home includes a residence where you actually live (not required for your compact license). You cannot simply use an address of convenience. To survive a serious audit, you will have to provide proof, potentially including a site visit. You would need to shift all your documentation there, like drivers license, car registration, voting registration, BON (very important legal address should a complaint be filed), prove that you pay rent in the example you cited of your cousin (I'd suggest a house sharing agreement) with receipts, and a bedroom that is yours exclusively no matter when you return. Optimally, a local physician et cetera. A preponderance of evidence is the legal threshold here absent clear fraud.

While not required, your tax home would become much more solid if you could work per diem locally every once in a while. You should return home "frequently" but this is a pretty soft and poorly defined requirement. There are a number of ways to break a tax home and I'd suggest reading more on the topic on PanTravelers (pick the free registration) or Travel Tax. One is by working more than 12 months (out of any two year period) in the same general area outside your tax home - if you do, that is now your default tax home no matter the other evidence to the contrary. An example would be rotating around the San Francisco Bay area, even though you are in a different city each 3 month assignment. 

@NedRN this is the clearest explanation of the requirements for a tax home that I have ever read (and I have read a bunch of them). Thank you for sharing your wealth of expertise with us! I'm always really impressed with the depth and clarity of your answers.

I'm surprised to hear about the '12 months out of any two year' rule. I've known a number of travelers who will take travel contracts several years in a row at the same facility and extend them to 9 months. They usually say that the agency won't let them work for a straight year; instead, they work for nine months, leave for three, come back for nine, etc. The agency lets them do it, so they believe that they are in the clear from a tax home perspective. I'm sure several of them would be screwed if they got audited.

Edited by adventure_rn

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Indeed. There is a big difference between a calendar or tax year, and a 12 month year. Mind you, that is merely guidance from tax professionals defining the IRS rule, and lessons from Tax Court cases. Some tax professionals cite a bit more leeway but none use a calendar year to restate what a "year" means. There are always technicalities on top of sound bites. For an obscure example: travel to and from your tax home counts towards time worked. Thus working four consecutive 3 month assignments is actually greater than a year. A bit technical, and unlikely that a first line auditor would catch it (in my belief anyway).

Some agencies just require a month time out to "reset" a clock (perhaps because of the example above) and the traveler goes right back to the same hospital. In some cases, that can result in 100% of the travelers full time income from just one geographical source over many years, which would normally trigger a change in tax home. Way too embarrassing to have ever see first hand examples posted online, but certainly tax professionals like Traveltax have seen quite a few cases.

Mind you, the risks of a random audit at our income level (especially if you do not itemize) by the ever smaller staff and funding at the IRS are small, but not zero. However collateral damage is very possible. Because of the numbers of misbehaving agencies is large, the IRS has been cycling through audits of agencies for well over 10 years now, getting them to change policies. The IRS typically audits some of their current or former travelers to establish evidence and that increases the chance of a life changing audit for travelers.

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