Understanding Pay (Wage) vs. Per Diem

hotdemos · Mar 15, 2013

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).

That is a LIE! Call any tax attorney or the IRS and they will tell you that Suspiciously low income — If you’re making much less than others in the same profession, raises a red flag.

brookiern · Mar 15, 2013

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.

NedRN, I don't think you really read what Nicholaa2 and I wrote as our major key points. It's not about how much you make hourly, it's about your taxable wages. The IRS will look at the taxable wages and nontaxable wages and want to know why so much of the nurse's wages were not taxed and when it comes down to the matter why the nurse was only making $8 an hour. They do care how much nurses are making per hour in the sense that a nurse is not going to make $8 an hour considering that it is not anywhere near the national average for nurses salaries. When they look at the nontaxable wages, they will want to know why those wages were not taxed. Agencies have certain things they can write off and pass on the individual nurse and this is where the dishonesty occurs. I would NEVER accept a job where my hourly rate was only $8 an hour, even if i was receiving a generous stipend, and furthermore, I would never accept an hourly rate where a good portion of my take home pay wasn't taxed. The IRS isn't stupid and to think that they won't audit a nurse is just ignorant. This sounds fishy and not at all something I would find advisable to even consider.

hotdemos · Mar 15, 2013

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.

Yes it is unusual for a NURSE to itemize but it is not unusual for a TRAVEL NURSE to itemize, especially if all you do is TRAVEL NURSING. NedRN is an agency man and is pro agency at any cost. Anyone who suggests that you work for $12/hour to avoid taxes is out of their mind. Do not let the scam agencies scam you.

hotdemos · Mar 15, 2013

The IRS isn't stupid and to think that they won't audit a nurse is just ignorant. This sounds fishy and not at all something I would find advisable to even consider.

This is so TRUE!!!

hotdemos · Mar 15, 2013

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

If you really owned a C-corp you could.

hotdemos · Mar 15, 2013

The average traveler benefits more from taking tax free housing and per diems than they would from doing it all themselves.

That is garbage because companies that promote the tax-advantage plan always pay far less than companies who do not promote the plan. Whether you itemize or not you will make more money with a company like aces when compared to the scam agencies that you are promoting. When an agency use the tax-advantage plan as their main selling point, do not walk away, run.

NedRN · Mar 15, 2013

NedRN, I don't think you really read what Nicholaa2 and I wrote as our major key points. It's not about how much you make hourly, it's about your taxable wages. The IRS will look at the taxable wages and nontaxable wages and want to know why so much of the nurse's wages were not taxed and when it comes down to the matter why the nurse was only making $8 an hour. They do care how much nurses are making per hour in the sense that a nurse is not going to make $8 an hour considering that it is not anywhere near the national average for nurses salaries. When they look at the nontaxable wages, they will want to know why those wages were not taxed. Agencies have certain things they can write off and pass on the individual nurse and this is where the dishonesty occurs. I would NEVER accept a job where my hourly rate was only $8 an hour, even if i was receiving a generous stipend, and furthermore, I would never accept an hourly rate where a good portion of my take home pay wasn't taxed. The IRS isn't stupid and to think that they won't audit a nurse is just ignorant. This sounds fishy and not at all something I would find advisable to even consider.

The IRS has no idea how much you make in nontaxable reimbursements, they are not reported to the IRS. They are reimbursements, not income. I didn't say the IRS won't audit a nurse, in fact I said just the opposite. They just don't audit very many taxpayers at all in our income bracket, absent some issue with your return. It is all about relative risk.

NedRN · Mar 15, 2013

If you really owned a C-corp you could.

OK, for the forth time now, I can't. I can pay an employee a housing stipend based on GSA rates, but the IRS disallows major stockholders paying themselves that way - potential for abuse and so on. The same is true for sole proprietors. M&IE yes, housing no.

NedRN · Mar 15, 2013

That is garbage because companies that promote the tax-advantage plan always pay far less than companies who do not promote the plan. Whether you itemize or not you will make more money with a company like aces when compared to the scam agencies that you are promoting. When an agency use the tax-advantage plan as their main selling point, do not walk away, run.

This is getting quite repetitive, you are trolling and twisting facts. Every agency pays so-called tax advantage - which of course is a marketing term which is self defined by every agency. Perhaps Aces doesn't call in "tax advantage" but they are indeed paying tax free benefits which is the basis of the term. On top of that, the IRS is now requiring all agencies to pay M&IE if they pay housing. If Aces isn't doing that, they are not in compliance. That probably won't get you into trouble, but may cause Aces a great deal of trouble. It could even cause you trouble if you are deducting M&IE and get audited and the IRS determines per rule that 40% of your housing stipend is actually M&IE taxable at 50%. Unlikely, but possible.

It sounds like you may be double dipping. For example, travel pay. You are apparently defining Ace's payment to you as to the assignment only. If you are audited, the IRS will look at your total travel expenses and reimbursements, not each segment of travel.

Frankly, it sounds like your lack of knowledge of taxation and poor advice is getting you into a great deal of trouble if you are ever audited. You are definitely engaging in high risk behavior and it would be prudent to set aside savings to pay for potential consequences. Good luck!

hotdemos · Mar 15, 2013

OK, for the forth time now, I can't. I can pay an employee a housing stipend based on GSA rates, but the IRS disallows major stockholders paying themselves that way - potential for abuse and so on. The same is true for sole proprietors. M&IE yes, housing no.

It so funny that a business pro who stated "My payroll is a business expense so zero money left at the end of the year in the corporation. Zero balance, zero corporate taxes owed." has not figured his way around that issue. It makes me think that you are really not in business for yourself.

NedRN · Mar 15, 2013

I'm hardly likely to be asking someone who hasn't grasped the basics of business to tell me a legal way to do it. Particularly someone who seems to be skirting tax law.

hotdemos · Mar 15, 2013

This is getting quite repetitive, you are trolling and twisting facts. Every agency pays so-called tax advantage - which of course is a marketing term which is self defined by every agency. Perhaps Aces doesn't call in "tax advantage" but they are indeed paying tax free benefits which is the basis of the term.

Yes every agency has a tax-advantage plan. The difference is the scammers try to use tax-free benefits as part of your pay package so they can pay you a very low hourly wage. When you allow the agency to pay you a low hourly wage the ANGENCY saves money because they pay less in Social Security and Medicare Taxes on the employee behalf. The tax-advantage plan only benefits the agency.