Understanding Pay (Wage) vs. Per Diem

hotdemos · Mar 15, 2013

And again, Ned is correct, you aren't necessarily taxed twice, for instance an LLC, partnership or a sole proprietor (which is what I'm familiar with) is only taxed on their share of profits, of which is considered their income and the business isn't taxed at all, it flows through to the partners.
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C-corporations differ vastly from LLCs, Partnerships or a sole proprietor. NedRNS stated he has a C-corp. Are you saying they are all the same??

hotdemos · Mar 15, 2013

Most folks have LLC's or S corps because that is too much work to avoid double taxation.

A c-corp is simply the worst business model for a sole properiotor who does not want to show a profit. NedRn I doubt that you are in business for yourself. Any Tax attorney or CPA will tell you that a c-corp is the worst model for a one man operation.

hotdemos · Mar 15, 2013

Is there something in this link that supports your contentions? I don't see anything that disagrees with anything I said

“CPAs and Tax professionals are seeing a rise in IRS audits for nurses and healthcare travelers this year, finding cause for higher taxes and disallowed deductions.” Nurses' Taxes & Accounting - Centurion Tax Resolution did you not read the info on the site???

hotdemos · Mar 15, 2013

Well I've never been a travel nurse, but have been self-employed for 90% of my adult life (in LLC's, partnerships and a sole proprietorship).

Since you have never been a travel nurse or a Registered Nurse let me educate you. As a travel nurse you are not self-employed. Some companies are promoting a tax-advantage plan in which they pay you a low wage such as 12/hour. They give you the rest of the compensation in tax free stipends such as housing and meals $3000/month or more......Why deal with those scammers when there are legitimate companies that will pay for housing and you make 40/hour or more. For Example ACES pays 40/hour or more....and they pay for housing and travel. Why would anyone want deal with scam agencies promoting a so called tax advantage plan which destroys workers comp, social security, medicare and overtime. I challenge you to find an Agency promoting a tax advantage plan that will net me more income than I make with ACES.

hotdemos · Mar 15, 2013

Aces also gives you a $200 per week tax free stipend on top of a great hourly wage for a Travel RN.

hotdemos · Mar 15, 2013

Can you please tell me what you have deducted that is over $6100 while traveling for a year?
I do multiple short term assignments of 4 weeks or less. I deduct everything I legally can. I flew to California several times last year just for full-time, non agency job interviews. The deductions can add up quickly. My car rentals and Flights added up to more than $6100 last year. My biggest deductions come from housing when I opt out of the free housing to get an higher hourly wage. For example I deduct.....Transportation Costs—plane, train, boat and bus fare as well as driving expenses to my assignments, including car maintenance. Tolls and parking count, too. If I Travel by taxi from an airport or station to my temporary housing that is also deductible. When I rent a car, my work-related travel in that car is deductible;
Housing and Meals—all meals, beverages, and associated taxes are fair game;
Cleaning—dry cleaning and laundry costs related to your assignment;
Telephone Expenses—related to my assignment, including mobile phone expenses;
Internet and Computer Expenses—Internet access and computer maintenance;
License Fees and Continuing Education Costs;
Malpractice Insurance;
Uniform Costs;
Job Search Costs;

brookiern · Mar 15, 2013

As I research travel nursing and read this forum and all the information on compensation, I can't help but be afraid of accepting a contract just because the overall numbers look good, especially since I have always had simple tax filings with no fear of audit.
The job I was currently looking at appears to be one of the "too good to be true" positions, so I wanted to put the figures out there and post the comments the recruiter made to me to see what the experienced travel nurses have to say.
[TABLE=width: 100%]
[TR]
[TD=class: payHdr, colspan: 2]Contract Shift Pay Detail[/TD]
[TD=class: payHdr, colspan: 2][/TD]
[/TR]
[TR]
[TD=colspan: 2][/TD]
[TD=colspan: 2][/TD]
[/TR]
[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]$284.40[/TD]
[TD=class: cellLabel][/TD]
[TD=class: cellText][/TD]
[/TR]
[TR]
[TD=class: cellLabel](Per Diem):[/TD]
[TD=class: cellText]$228.16[/TD]
[TD=class: cellLabel][/TD]
[TD=class: cellText][/TD]
[/TR]
[TR]
[TD=class: cellLabel](Taxable Wages):[/TD]
[TD=class: cellText]$64.64[/TD]
[TD=class: cellLabel][/TD]
[TD=class: cellText][/TD]
[/TR]
[/TABLE]
Additional Benefit: You will receive a healthcare stipend of $358.80 for this
contract paid out at $0.69 per hour.
*My compensation package is based on the fact that I have selected the option to 'relocate' during this assignment. (I am not relocating, I would be driving ~95 miles round trip daily)
Those figures are for 13 weeks, 8 hours a day, 5 shifts a week and as I told the recruiter, it looks like I am only making $8 an hour officially because the majority of the money being paid to me would be per diem and not taxable wages - one of the "too good to be true" offers.
I was under the impression that the per diem couldn't go above the federal rate, which for this county is $77 lodging, $46 incidentals - but maybe I don't understand the rules. I do tend to over-worry about everything, but I keep reading if it sounds too good to be true, it probably is... so I am hoping I can get some info, tho I am reading through the help posts here again to try to decipher it.)
Here are some quotes from her:
"They tell us how much per diem we can pay in a week and divide it by the number of shifts"
"For 5 days of work you will get two deposits one for the wage amount 64.64 x 5 $323,20 - $228.16 x 5 1140.80" (So here she is saying I only get $8.08/hour and the rest is per diem. I don't like hearing that...)
"Lawyers worked it on based on what we can do via the IRS and we have been paying this way for over 17 years."
"We have never had a nurse audited we have nurses that have been working for us for over 10 years they file their income tax "
-- I actually went and filed an application directly with the facility because I feel that this agency really is trying to sneak around the IRS and pay less taxes and I don't want to be the one that ends up with the tax liability and audit.

I haven't started travel nursing yet but am in the process of getting all my paperwork together to start traveling in mid May hopefully. I can tell you I was warned by one recruiter not to accept jobs where the taxable wages are well below the national average. She said agencies do this so they can pay less in taxes, etc. but it only ends up hurting the nurses and they are audited, having to owe thousands in back taxes. I would be weary of accepting any job where the hourly taxable rate is only $8, since this is about minimum wage and the IRS knows nurses make much more than minimum wage. This will be a red flag to the IRS for sure. This company is only looking out for their best interest and is being dishonest with you.

NedRN · Mar 15, 2013

I hate to tell you this, but Aces paying housing is part of what most agencies call Tax Advantage. The IRS has been auditing agencies for the last three years and requiring that agencies no longer pay housing alone (stipend or provided), but pay housing/per diem on a 60/40 ratio (similar to the GSA tables for government employee reimbursement). The reason is that housing is a straight expense and per diem is only 50 percent expensed. So it is actually Aces that is scamming the government, not the more typical agency (especially those that have been recently audited) that pays per diem.

This is the third time I've said this, but once again, regular agencies can pay out more to their travelers in a housing stipend than I can pay myself. I also have to pay taxes on 50% of per diems, regular employees get the entire amount tax free. The average traveler benefits more from taking tax free housing and per diems than they would from doing it all themselves.

My major gain from being self employed is that I get the gross profit margin that agencies take from the bill rate to pay their own expenses. Of course, I have to duplicate that in a much less efficient way: I have to find and negotiate hospital contracts; service the contract; get malpractice and general Liability Insurance; workers comp; unemployment; invoice; payroll and withholding payments; benefits; and keep track of multiple federal, state, and local returns. Not for everyone, that is for sure.

You pay for your own travel? Really? Sounds like Aces is scamming you. And you have lost $6,100 of tax free payments. Only amounts higher than that will result in a tax savings. You have also paid for those flights with post tax dollars with FICA taken out - you won't get that back at the end of the year.

NedRN · Mar 15, 2013

I haven't started travel nursing yet but am in the process of getting all my paperwork together to start traveling in mid May hopefully. I can tell you I was warned by one recruiter not to accept jobs where the taxable wages are well below the national average. She said agencies do this so they can pay less in taxes, etc. but it only ends up hurting the nurses and they are audited, having to owe thousands in back taxes. I would be weary of accepting any job where the hourly taxable rate is only $8, since this is about minimum wage and the IRS knows nurses make much more than minimum wage. This will be a red flag to the IRS for sure. This company is only looking out for their best interest and is being dishonest with you.

The IRS only knows what you make each year, not what your hourly wage is (what they see is what you see on your W-2). Nurses are low audit risks, we just don't make enough money to be worth the IRS limited resources. The major issue if is you are legitimately working away from a legitimate tax home (perhaps a third or more of travelers are not), you will not lose in an audit. I would recommend that you use a good tax preparer such as TravelTax. He will defend you in an audit if he does your returns and will keep you straight on the tax home front. He also has a tremendous amount of traveler specific tax information on his dot com site and some tools to use to document your tax home status and your job and expenses away from home. Most traveler audits are not initiated because they are travelers, but because of errors or aggressive deductions on their itemized tax returns. Mind your P&Qs properly, especially if you accept "excessive" tax free money (because the amount you have to return is potentially higher), and you will survive an audit fine if you are in the small percent of taxpayers in our wage bracket who get audited.

By the way, the Aces traveler who is making all the noise in this thread actually has a much higher risk of being audited than the typical traveler. It is unusual for a nurse (remember we report our occupation to the IRS on our return) to itemize large amounts of travel expenses. It is more common for regular business travelers but still scrutinized carefully by the IRS because it is easy to cheat on such expense reporting. Hopefully that person's tax preparer will defend him/her effectively in an audit. He is not necessarily doing a thing wrong technically (although I don't believe he is minimizing his tax burden), but his audit risk is much higher than a regular traveler. An audit is no fun, even when you win, so I do a lot of things rather conservatively to avoid the risk, and make it easier to survive one.

BluntForceTrauma · Mar 15, 2013

I do multiple short term assignments of 4 weeks or less. I deduct everything I legally can. I flew to California several times last year just for full-time, non agency job interviews. The deductions can add up quickly. My car rentals and Flights added up to more than $6100 last year. My biggest deductions come from housing when I opt out of the free housing to get an higher hourly wage. For example I deduct.....Transportation Costs—plane, train, boat and bus fare as well as driving expenses to my assignments, including car maintenance. Tolls and parking count, too. If I Travel by taxi from an airport or station to my temporary housing that is also deductible. When I rent a car, my work-related travel in that car is deductible;
Housing and Meals—all meals, beverages, and associated taxes are fair game;
Cleaning—dry cleaning and laundry costs related to your assignment;
Telephone Expenses—related to my assignment, including mobile phone expenses;
Internet and Computer Expenses—Internet access and computer maintenance;
License Fees and Continuing Education Costs;
Malpractice Insurance;
Uniform Costs;
Job Search Costs;
Maybe I'm misunderstanding....but if they are paying for your transportation to and from an assignment, and giving you a stipend for a rental car, how does that become an expense to you? I have never paid for transportation to or from an assignment without reimbursement. So would I still be able to deduct it?

hotdemos · Mar 15, 2013

I hate to tell you this, but Aces paying housing is part of what most agencies call Tax Advantage..

That is 100% a lie. When ACES pay for your housing it is not considered part of the tax advantage plan. Most agencies are promoting the tax-advantage plan as a part of your take home pay. When aces pay for your housing they pay the company or hotel directly. You still get paid $40/hour or greater and you do not have to use any of the money you made to pay for housing. The tax advantage plan gives you money for housing and meals and you will use part of that money to pay for housing and pocket the rest.

hotdemos · Mar 15, 2013

Maybe I'm misunderstanding....but if they are paying for your transportation to and from an assignment, and giving you a stipend for a rental car, how does that become an expense to you? I have never paid for transportation to or from an assignment without reimbursement. So would I still be able to deduct it?
You can deduct any amount not covered by the nursing agency. I often fly back home every few weeks so all of my RETURN flights to the assignments, which I pay for, are covered. I deduct all my meals. Depending on the assignment I will opt for a higher rate of pay and take care of all the travel and lodging myself especially on rapid response assignments or assignments where I can stay with friends. The bottom line is if you deal with a company that does not include travel and lodging as part of your net pay you will earn more and net more.