Traveler tax loophole!

fizz2Nurse · Mar 9, 2008

The agency is cleary giving you some ill advice..... oh sure they can give you the money, but if they don't tax it then you become responsible for the tax.

Since you will be driving home every night you are not incurring a cost for lodging.

If the tax isn't paid and you end up footing the bill you have to pay BOTH the part of medicare & SS taxes you'd be responsible for and the part the agency would be responsible for and when it came to tax time the agency would be all denial saying that you took the assignment and represented it as a travel assignment.

Cover your butt first and get impartial advice.

FireStarterRN, BSN, RN · Mar 9, 2008

Really? Hmmmm, I'd better look into it before signing. Thanks. Does anyone else here know about this?

FireStarterRN, BSN, RN · Mar 9, 2008

That are a very reputable agency around here, by the way. I'll ask our tax preparer what she thinks.

Jolie, BSN · Mar 9, 2008

There is no such thing as a free lunch or tax-free income.

The "tax-free" housing stipend is "tax-free" ONLY if you live away from home during your assignment and incur expenses related to maintaining a second household (or temporary lodging) at the work location AND maintain financial records documenting this second housing expense to be equal to or greater than the stipend you receive.

If you don't meet these criteria, you will be taxed on the full amount of the stipend.

Time to give your accountant a jingle.

PMHNP10 · Mar 9, 2008

I believe as a rule of thumb you have to live at least 40 miles from your assignment to receive tax free money (and not violate any tax laws), although I've heard others say 100 miles, so it's best to contact an accountant.

So you can't work 3 consecutive 12 hr. shifts at a hospital 20 miles away, stay at a hotel near the hospital during that block of days and collect tax free money--well actually you probably could get the tax free money, but Uncle Sam would get you in the end, plus a few bucks in penalties; and maybe a day or 2 at your local Fed. Pen.

FireStarterRN, BSN, RN · Mar 9, 2008

according to google map, it's 64.4 miles

FireStarterRN, BSN, RN · Mar 9, 2008

I sent the recruiter this email:

Dear so and so,

I spoke to someone on the phone regarding some of the details of the financial aspect of this contract. She told me that there is a weekly tax-free housing stipend that sounded quite generous. Does that remain tax-free if I don't use it for housing, but choose to drive the 65 miles roundtrip? And if it doesn't remain tax-free, who pays the FICA tax?

Sincerely,

JLS RN

fizz2Nurse · Mar 9, 2008

I believe as a rule of thumb you have to live at least 40 miles from your assignment to receive tax free money (and not violate any tax laws), although I've heard others say 100 miles, so it's best to contact an accountant.
So you can't work 3 consecutive 12 hr. shifts at a hospital 20 miles away, stay at a hotel near the hospital during that block of days and collect tax free money--well actually you probably could get the tax free money, but Uncle Sam would get you in the end, plus a few bucks in penalties; and maybe a day or 2 at your local Fed. Pen.

There is no 'rule of thumb" or set distance. The IRS rule is that it must be REASONABLE that you need the lodging and cannot safely return home, Therefore the lodging is required

For example: In many areas of the country traveling on an interstate in good weather may make 80 or 90 miles reasonable, just ask the thousands in California that commute 80 or 100 miles one way.

Other things may make your stay reasonable:

Some places you work three 16's a week and live 60 miles away. Your commute would take you on the 405 in Seattle, probably unsafe since it may take two hours per day each way to commute, so you elect lodging across the street from the assignment. Seems reasonable.

That same commute you make in the summer from Colorado Springs to Denver ... it just snowed in the winter. Seems reasonable.

Your assignment is Sacramento, you live in Hilton Head, SC .... reasoanble.

You have an assignment in Fort Worth, You live in Dallas .... not so much.

Remember the IRS test is what would be "resonable" to a normal person. You are the one that has to justify why you need the lodging or expense if the queston arises.

And the "50 mile" or 100 or 200 mile rules? Those are usually agency tests to show they have due diligence and protect them from liability ( not YOU) or requirements by facilities to make sure the locals don't get travel pay.

fizz2Nurse · Mar 9, 2008

I sent the recruiter this email:
Dear so and so,
I spoke to someone on the phone regarding some of the details of the financial aspect of this contract. She told me that there is a weekly tax-free housing stipend that sounded quite generous. Does that remain tax-free if I don't use it for housing, but choose to drive the 65 miles roundtrip? And if it doesn't remain tax-free, who pays the FICA tax?
Sincerely,
JLS RN

Calcualte the total dollars, remeber to deduct a small amount to cover the employers cost for paying payroll taxes out of the previously untaxed amount and take the whole thing as pay.

if the agency doesn't like it - there are a LOT of other agencies and places out there!

PMHNP10 · Mar 9, 2008

There is no 'rule of thumb" or set distance. The IRS rule is that it must be REASONABLE that you need the lodging and cannot safely return home, Therefore the lodging is required.

LOL...since when did the IRS become "REASONABLE"? :sofahider errrr...uhhhh, I mean...yes, the IRS is certainly a reasonable bunch of folks. :loveya:

And the "50 mile" or 100 or 200 mile rules? Those are usually agency tests to show they have due diligence and protect them from liability ( not YOU) or requirements by facilities to make sure the locals don't get travel pay.

now this makes sense...when I traveled (and now my wife does), our agency said we needed to be at least 40 miles from our assignment. Of course 40 miles in Houston traffic is well over a 1 hr trip (closer to 2 barring any major weather/traffic issues), so add to the scenario if someone works nights and that distance could justifiably be lessened.

Thank you for this bit o' info. Were you an accountant in a previous life, or a traveler who used an accountant who specializes in travel nursing taxes?

JaneyW · Mar 9, 2008

A lot of very seasoned travelers I have worked with will say that they prefer a contract that gives them the highest hourly possible and not fool around with all of the other "tax free" stuff only to be burned later. It is tax season and the HR Block kind of places are everywhere--check it out with a professional. Remember that if it sounds too good to be true it probably is.