Understanding Pay (Wage) vs. Per Diem

hotdemos · Mar 14, 2013

"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." This sounds like someone who is either working for a nursing agency or who has never did travel nursing before..

hotdemos · Mar 14, 2013

You can deduct on your own when you do your taxes.........

Travel and Transportation

Traveling costs incurred while away from home on business
Traveling costs paid in connection with a temporary work assignment
Transportation between your home and a temporary work location if you have no regular place of work but you ordinarily work in the metropolitan area where you live and the temporary work location is outside that area
Transportation between your home and a temporary work location if you have at least one regular workplace for this employment. It doesn’t matter how far away the temporary location is in this case.
Transportation from one job to another if you work two places in one day
If you are self-employed and your home is your principal place of business, all business travel is deductible.
For more information, see IRS Publication 463

Source James Maertin, CPA

NedRN · Mar 14, 2013

"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." This sounds like someone who is either working for a nursing agency or who has never did travel nursing before..

Travel full-time for 17 years now. Technically, I do own my own agency with one employee - me. I also prepare my own personal and corporate tax returns, run my own payroll, and publish tax information for travelers. If you cannot or will not discuss content, I can!

Your "CPA" list only suggests categories of deductions. That is only part of the story for travelers. Here are a few bullet points for you.

The 2013 standard deduction is $6,100. This means your first $6,100 of business expenses get you zero benefit over taking the standard deduction. So if you don't itemize already, you are already $6,100 behind by not accepting tax-free money from the agency. You also lose 15.3% on FICA by not taking money from the agency (yes, that includes the employer share).

Housing: your agency can give you up to $3,000 a month tax free for housing anywhere in the country. If you don't spend the entire housing stipend (whatever the amount), the rest is free to spend as you like tax free. Compare that to deducting housing costs: zero gain for your bank account as you can only deduct receipted costs. In addition, you are paying for housing with taxed money so you have lost that 15% FICA share forever.

M&IE: Again, everything your agency gives you is tax free to you to spend as you like or put in the bank. You can deduct the GSA amount for every day you are away from home, less 50% (you will use form 2106 to report unreimbursed business expenses and take 50% directly on that form before transferring the amount to your 1040). So you lose 50% of the benefit immediately by doing it yourself, again with money that has already had FICA taken out.

Health insurance: Employees cannot deduct the cost of their health insurance. Employers can however provide health insurance and it is a simple expense (first dollar) to them. If you carry your own insurance, you can sometimes persuade an agency to reimburse part or all of your premium tax free, but otherwise you lose any tax benefits there as well.

It is extremely rare that a traveler's tax situation would benefit by itemizing rather than taking reimbursements from an agency although it does happen. Obviously, if you are a 1099 employee, you would take advantage of the first dollar deductions (no FICA taken out first) provided by Schedule C rather than itemizing. The other more common circumstance is working a seasonal contract directly for the hospital where they tax your housing benefit and don't provide M&IE.

The unfortunate thing about many things in life is if you don't learn about them yourself, you may not get nor recognize the best advice from professionals. I only know of half a dozen tax preparers nationally that I could recommend to travelers to give appropriate advice.

The focus of CPA training is business accounting, not preparing individual tax returns, much less specialized ones such as ours. EA is a better starting qualification if you are looking for a tax preparer.

hotdemos · Mar 14, 2013

The 2013 standard deduction is $6,100. This means your first $6,100 of business expenses get you zero benefit over taking the standard deduction.

Of course the tax advantage plan benefit you if you work for your own nursing agency. For nurses in the real world the tax-advantage plan is a tax scam. If you are a true travel nurse you itemized deductions will far exceed $6,100.

hotdemos · Mar 14, 2013

Travel full-time for 17 years now. Technically, I do own my own agency with one employee - me.

This guy runs his own nursing agency and never hired an employee???? I am a true travel nurse with a wife and 3 kids and my itemized travel deductions are always greater than my standard deductions. Nursing agencies are trying to pay nurses a taxable wage from $9 to 12$/hour. This low wage only helps the agency. Please provide me the name of a bank that would give you a mortgage based on $12/hour.

hotdemos · Mar 14, 2013

Housing: your agency can give you up to $3,000 a month tax free for housing anywhere in the country. If you don't spend the entire housing stipend (whatever the amount), the rest is free to spend as you like tax free.

Location...Location....Location....that stipend amount will be based on the average housing cost in the area of the country you are working.

hotdemos · Mar 14, 2013

It is extremely rare that a traveler's tax situation would benefit by itemizing rather than taking reimbursements from an agency although it does happen.

I personally do not know a travel nurse who works full-time that does not itemize. Let me guess NedRN you have an S-corp and you pay yourself very little so you pay very little taxes....but you own the company so you still control the profits. It is very different when you work for a travel company and you do not own the company.

NedRN · Mar 14, 2013

Most of the time I traveled, I worked for regular agencies - perhaps 8 different ones. The advantages I mentioned above come from working for other agencies. As the sole owner of my corporation, I cannot take advantage of IRS housing rates, I too have to use receipted expenses only. My corporation happens to be a C corp and I pay myself in full every year, otherwise it is double taxation. I'm a full time traveler and have never itemized and I don't know of a traveler who itemizes unless they have mortgage interest to deduct. I have never exceed my standard and personal exemptions.

Your itemized deductions may well be above $6,100, but there is no tax benefit at all to the first $6,100 of deduction. And as I said, itemizing already taxed money is no where near as beneficial as just taking tax free reimbursements. Very few travelers go that route except the examples I noted.

Getting a mortgage? That is a different topic from maximizing your net income. I paid cash for my home so the issue did not come up until I decided to get a line of credit. Not all banks will do it, but many will accept proof of compensation from all your "revenue" including mine. That includes your housing reimbursement and M&IE which are substantial. My bank had no problem with that (it also helped that I had lots of liquidity plus a perfect credit score). Presumably you are just playing devil's advocate? You already have a mortgage?

On a related topic workers comp accepts those reimbursements as part of your total compensation in the case of a claim. Some states put up a bit of fuss but a WC lawyer sets it straight easily.

hotdemos · Mar 14, 2013

The focus of CPA training is business accounting, not preparing individual tax returns, much less specialized ones such as ours. EA is a better starting qualification if you are looking for a tax preparer..

I find that is very easy to become and Enrolled Agent vs. becoming a CPA. I will continue to allow a CPA to check my taxes for errors before I file. If you are working full-time as a travel nurse the tax advantage plan is a disaster.

hotdemos · Mar 14, 2013

My corporation happens to be a C corp and I pay myself in full every year, otherwise it is double taxation.

You are already being double taxed. You pay taxes on your personal Income and You pay corporate taxes. S-corps do not pay taxes. You are being doubled taxed and you are giving out tax advice????

hotdemos · Mar 14, 2013

I have never exceed my standard and personal exemptions.

Are you a Registered Nurse?? Are you a full-time travel nurse???

NedRN · Mar 14, 2013

Interesting that every agency offers so-called Tax Advantage.

If there are no profits left in a corporation (zero-balancing it), there are no corporate taxes. S corps and almost all LLCs are pass-through entities, accomplishing exactly the same thing - just without the careful accounting I have to do at the end of the fiscal year. But also without the medical benefits I receive.

I am an RN and full time traveler. But I can tell you that I don't put blind faith in labels such as RN, MD, or CPA. Nor do I put a lot of credence in some random internet poster who cannot cogently argue points that is copied and pasted from other sites and says that 99 percent of travelers and their agencies are doing something illegal, and that is more beneficial to trust your CPA despite not being able to counter any of the facts I have posted here. Crazy stuff! Since there is effectively no argument you present, I'm not going to answer your taunts anymore. I was mostly interested in correcting misinformation for others here.