Understanding Pay (Wage) vs. Per Diem

AWanderingMinstral · Mar 11, 2013

I have been a traveler on and off for the past two years. I think of my compensation as a pie. The pie can be sliced in a lot of different ways. If your hourly rate is well below the market rate (which it appears this offer is), then that would be a red flag to the IRS. I may have misunderstood some of what you posted, but I have always been under the impression that you cannot qualify for "lodging" if you live within a certain distance and are commuting back to your "tax home." Just my thoughts. Good luck!

NedRN · Mar 11, 2013

You are right to have some concern, however if you have proper tax home status, any risk is now on the agency. And many agencies have been audited in the last few years.

The IRS has no idea of what you are making an hour, basically what they see is quarterly taxable earnings. You are not at risk for audit in our wage category no matter how much your annual earnings fluctuate.

If you are working away from home (required to get tax-free "reimbursements"), you are eligible to be paid housing and M&IE 7 days a week. So multiply those maximum per diems by 7 and divide by the number of shifts you are working (three?).

If you work for the hospital directly, they will not pay you per diems: they don't want any IRS risk at all or the work that goes with verifying your tax home status. You can alternatively deduct M&IE and actual housing costs (not the GSA amounts), but with the thresholds, post FICA dollars, and much lower amounts for housing, you will be far behind. Your audit risk with deducting business expenses on your 1040 will go way up as well.

Reimbursements are not reported* to the IRS so there is not much to be worried about there. If there is any issue, you covered with your tax home status. If the IRS determines that the agency has not been paying you correctly, guess who they are going after? That's right, the agency! Deep pockets.

Traveler's risks from semi-legitimate agency schemes are very low, especially if tax home status is maintained and can be documented.

*Reimbursements can in fact be noted on your W-2 but only as a courtesy to the taxpayer, the IRS ignores it (often box 14 if memory serves plus one other method). Depends on the payroll company but it can freak out travelers when they see it. It doesn't mean you have to report it and pay taxes like you would with a 1099-MISC.

nicholaa2 · Mar 11, 2013

Thanks to both of you, and Ned, your posts are always so chock full of good information!

I am just worried that when I see my per diem rate for this county on the IRS website as $77 + 46 ($123/day) that even if you multiply it by 7 and divide by 5 (5 days of 8 hours), that comes to $172.20 a day and they were quoting me $228.16 as their per diem rate. That and laying out the $8/hour actual wage rate and I can't help but think they are skirting some laws somewhere.

I know a 50-mile radius isn't set in stone, but that also worries me since most times I would be commuting back and forth to my apartment where I currently live (which is I believe is considered my "tax home") - it doesn't seem like I am even really qualifying myself to receive the travel nurse reimbursement if I am not staying up in the city where I am working.

UGH - so, I emailed the recruiter and questioned these figures and she sent me back another proposal with a new amount if I wasn't going to be a "travel nurse":

[TABLE=width: 100%]

[TR]

[TD=class: cellLabel]"Gross" Shift Pay:[/TD]

[TD=class: cellText]$292.80

[/TD]

[TD=class: cellLabel][/TD]

[TD=class: cellText][/TD]

[/TR]

[TR]

[TD=class: cellLabel]"Net" Shift Pay:[/TD]

[TD=class: cellText]$279.82[/TD]

[TD=class: cellLabel][/TD]

[TD=class: cellText][/TD]

[/TR]

[TR]

[TD=class: cellLabel](Per Diem):[/TD]

[TD=class: cellText]$162.96[/TD]

[TD=class: cellLabel][/TD]

[TD=class: cellText][/TD]

[/TR]

[TR]

[TD=class: cellLabel](Taxable Wages):[/TD]

[TD=class: cellText]$99.84[/TD]

[/TR]

[/TABLE]

*My compensation package is based on the fact that I have Not selected the option to 'relocate' during

this assignment.

So now I would be making $12.48 an hour (oh big difference there!) and the per diem still seems higher than IRS guidelines even though it says I am not "relocating"

Why do I still feel like the company is somehow taking more of a % than they should be? Or that they're skirting the laws?

Maybe it's my psych nurse experience giving me paranoia... but I just don't like seeing an hourly rate like that.

I make $30/hour at my permanent job or $240/shift with PTO and benefits, and this contract with wage and per diem would only have me at $36.60/hour without PTO, no real benefits, no guarantee for extension and I would be driving 75 more miles round-trip which if I could IRS charge the mileage, ends up almost negating the $6/hour increase over my current pay rate, not even considering the actual drive TIME 75 miles adds.

This just doesn't seem like it's really that much better of an offer than my current/permanent position.

I think they're holding out on me :)

NedRN · Mar 12, 2013

If you are commuting from home, you are not eligible for tax-free reimbursements. Obviously, or all staff employees would also be eligible. There is no 50 mile rule for taxpayers and business expenses, but agencies can use that parameter to qualify you for eligibility (their determination is meaningless if you get audited of course). The primary way to figure this out is if the job or travel requirements require you to sleep at the remote location. No? Then you will lose in an audit. So you may be better off working directly for the hospital since all your compensation is taxable anyway.

If you do a quick Google for 1542, you will come up with an IRS publication probably the first hit (apparently the IRS gets more hits than history sites) that has several other methods for calculating per diems that are obviously IRS approved and much more favorable than the GSA site. That might be what your agency has used and if you look at the high/low method, every location in CONUS defaults to a "low" rate of $163 (housing and M&IE combined). You will see that is more than sufficient wiggle room for the rates they quoted.

Unfortunately, the IRS has discontinued Publication 1542 and now advises use of the GSA site. Presumably that is the end of the high/low method that was so advantageous (I used it myself through December). Eventually I will get around to finding out if the high/low is obsolete or not. Apparently your agency doesn't believe it to be so.

meandragonbrett · Mar 12, 2013

Tell your recruiter to take a hike. They should be telling you your hourly wages before tax and your per diem as separate figures.

hotdemos · Mar 13, 2013

Most agencies call this the Tax-Advantage plan. I call it the TAX SCAM plan. Agencies promote this plan because it allow the Agency to pay less social security and medicare taxes on your behalf. You can go for the higher hourly wage and still take advantage of all the deductions possible for a Travel RN when you do your taxes.

NedRN · Mar 13, 2013

No, you can't. For starters, you can only deduct actual costs for housing. Your employer can use standardized GSA housing tables at a much higher benefit to you. There is not much point to deducting business travel expenses unless you itemize already (usually just homeowners with a mortgage deduction), and there are other thresholds to meet after your standard deduction as well. Finally, FICA takes 15% off the top of taxable wages, and you will never get a cent of that back by deducting expenses at the end of the year.

I do hope you are not getting this misinformation from a tax professional, because it is very wrong indeed.

jtmarcy12, BSN, RN · Mar 14, 2013

Hi, all of this info seems like it is "skirting" your pay. I last did a travel assignment in 2006. I was paid 38.00 per hour. Got free housing, a rental car paid in full, and round trip air fare. I had a tax person who did my taxes. I lived on the east coast at first then permanently located to California. I still took "travel" assignments before signing on as a staff nurse with the hospital. I worked for ACES. When I lived on the east coast I worked for a company that made "a killing" off of me, the agency was Intellistaff. They did not offer air fare, I drove my car to the east coast and they paid about 25 cent per mile which was peanuts. The housing was good. But the mileage was paid after I got my first paycheck. With ACES everything is given up front, of course, except your first paycheck. There are agencies out there who want to "skirt"around your true pay. I like dealing with ACES, I knew what was expected of me and how much per hour I was getting, I never heard of all this "stuff" you are mentioning. Also those who had their own housing was given about $1,000.00 per month.

If you are currently getting $30.00 and they are offering 36.60 and you have to drive and they don't give you any compensation for housing you are losing and they are gaining, big time. Those nurses who worked as their own contractor got paid an hourly wage and they had to pay their own expenses which I heard some of the hourly pay was about $75.00 per hr. So this is my own personal experiences. I hope this will help you decide. Best wish and best traveling.

billyboblewis · Mar 14, 2013

It is sad when nursing comes down to accounting. I work on salary now as an RN nurse consultant for a charitable organization. They are very skimpy and try to get as much work as possible for as little pay as possible. They often try to sneak in taking your pto and holiday pay when you havent used it and making it add up to your salary. Fortunately I am on ss and do this to live at a more comfortable level. I do not bend over backwards for my company but I will for my customers as they are referred to this week. If I had the energy I did when I was younger I would organize this company as I did to a facility which took advantage of me when I was much younger. I dont know any other way to fight charitable greed.

hotdemos · Mar 14, 2013

Yes, you can! Travel Nurses can deduct unreimbursed expenses when they file taxes at

the end of the year without participating in any company-sponsored tax advantage

program. Agencies only promote the tax advantage plan because it allow the Agency to pay less social security and medicare taxes on your behalf.

hotdemos · Mar 14, 2013

I love ACES. No one can beat there rates. I have not had one company in 5 years that can match ACES rates.