Understanding Pay (Wage) vs. Per Diem

[nicholaa2]

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%]

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[TD=class: payHdr, colspan: 2]Contract Shift Pay Detail[/TD]

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

[TD=class: cellText]$292.80[/TD]

[TD=class: cellLabel][/TD]

[TD=class: cellText][/TD]

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[TR]

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

[TD=class: cellText]$284.40[/TD]

[TD=class: cellLabel][/TD]

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

[TD=class: cellText]$228.16[/TD]

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[TD=class: cellText][/TD]

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[TR]

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

[TD=class: cellText]$64.64[/TD]

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[/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.

[hotdemos]

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.

I fly home during my assignments. When I fly home during an assignment it is not covered by the agency. Only the return flights to the assignment are tax deductible.

[hotdemos]

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.

You are talking about grasping basic business concepts when you are using a C-corp for a one man operation???..LOL...We are talking about grasping basic business concepts from a guy 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." You sound like a guy who goes out of his way to cheat on his taxes. Who owns an agency with no employees???

[NedRN]

You are talking about grasping basic business concepts when you are using a C-corp for a one man operation???..LOL...

It is the only entity form where the corporation can pay for all medical benefits. The others can only cover health insurance pretax. That's a big benefit. The only advantage an S corp or an LLC have (besides simpler taxation) is the ability to use K-1 distributions to avoid FICA. I don't know of any small revenue businesses that do that. I load up my 401 matching to accomplish the same thing without having to defend a lower salary the way a K-1 would have to.

I've tried to figure out why more small businesses don't utilize a regular corporation and the only thing I can point to is that accountants and tax preparers recommend pass through entities, presumably because it is easier for them, not because it is anyway more beneficial for the business owner. There is also the big bug-a-boo about double taxation, but as I mentioned, it is very easy to avoid. It is interesting that the accountants and CPAs I talk to always bring up double taxation first, it is just simple math to avoid it, just a bit more work in December (or whatever the last month of the fiscal year might be).

[FutureCRNA?, BSN, RN]

I think you could say that the sky is blue, or water is wet and hotdemos would argue with you till the cows come home.

It seems very obvious that he only has SOME knowledge of taxes & business an not a whole, clear picture. It's getting very wearisome :)

[hotdemos]

It is the only entity form where the corporation can pay for all medical benefits. The others can only cover health insurance pretax. That's a big benefit. The only advantage an S corp or an LLC have (besides simpler taxation) is the ability to use K-1 distributions to avoid FICA.

Wrong again. Do you know anything about business or taxes??? You are talking about grasping basic business concepts when you do not know the benefits of a C-corp vs. a S-corp...Please educate yourself before giving out awful tax advice. Differences Between C Corporations and S Corporations

[hotdemos]

I think you could say that the sky is blue, or water is wet and hotdemos would argue with you till the cows come home. It seems very obvious that he only has SOME knowledge of taxes & business an not a whole, clear picture. It's getting very wearisome :)

And I should take tax advice from a undergraduate nursing student?? When you graduate please take NedRNs advice and earn low wages for your family. I demand to get paid fairly when I am on assignment. Send NedRN your resume when you graduate I am sure he would love to use you up and pay you pennies. As nurses we are patient advocates. How are you going to stand up to a MD concerning your patients when you are afraid to stand up to agency man (NedRN) trying to scam you??

[FutureCRNA?, BSN, RN]

Wow, all I have to say is wow :)

[hotdemos]

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.

What is your income bracket? You mean to tell me you own your own travel agency and you make less than a 100K a year??? What???? You make less than a 100k a year as a full-time travel nurse??? Having a high income-Though fewer than one-percent of taxpayers are audited each year, those making over $100,000 are five times more likely to be audited by the IRS.

[mth422]

Can I deduct for expenses that I've been compensated for? It is not on my W-2. I feel that would not be fair to do, even if legal. I don't want to skate near trouble regardless if legal.

I'm confused about LLC companies. I work for an LLC, am I considered self employed, and need to file as a self employed? Really?

[NedRN]

Can I deduct for expenses that I've been compensated for? It is not on my W-2. I feel that would not be fair to do, even if legal. I don't want to skate near trouble regardless if legal.

No, that is double dipping and tax fraud. If your documented expenses exceed your reimbursements (very rare except for travel expenses - think 51.5 cents a mile for your RT home and your commute at the assignment), you can deduct the difference.

I'm confused about LLC companies. I work for an LLC, am I considered self employed, and need to file as a self employed? Really?

If you get a W-2, you are an employee. It doesn't matter what kind of entity you work for.

[mth422]

Thanks a bunch! I reside and worked in Oregon, till October, then to Cali for a travel assignment. I'm filling out state taxes today. If I put part time resident, my taxes drop by $500. If I put full time resident they go back up. I MUST do it right, but I am SO CONFUSED. I DID live in CA, but I think I readI have to say I am full time resident. Please.... hurry me an answer. Am I part time or full time? CA is already filed as a non-resident, because I was a traveler. YES, I maintained my place here, and I do understand the rules for a tax home, and I qualify by 100%. All I need to know is full time resident vs part time resident. Thank you in advance!!!!!!!!!!!!

[NedRN]

You no longer reside anywhere? You will have to start by declaring all compensation from agencies, including travel, housing, and per diem. Then you will base your state taxes on that. I suspect you will be a part year resident of Oregon for last year if that is your question, but check their criteria.

If you are still residing in Oregon, then you are a full time resident there for tax purposes, and you do not have to declare the reimbursements and housing from your agency.