Working Too Long In One Place, My Boss Wants Me To Sign Contract

[Melilem]

I'm a travel nurse. I have stayed the limit at my current location, but due to family issues I wanted to stay one more assignment. My boss wrote up a non temporary contract. A nurse I work with said I should not take it because the IRS will consider me a resident and tax the stipends that I received as income for the whole year. Is she correct? Also- I'd really love some reviews of these online CPAs that work with travel nurses. Has anyone worked with travelnursetax or traveltax? 

[NedRN]

I know TravelTax personally and recommend him. Super ethical guy and will not do your taxes the way you might like  if you don't follow the rules so he may not be for everyone. That said, if you have any concerns not answered here (I'm giving it a shot), he will do a free phone consult. Probably standard practice. Also, the advantage of using a tax professional to do your taxes is they will defend your return in an audit. As long as you haven't provided false information. Pretty sure TravelTax will have an FAQ on this very issue on his website.

No, you will not be subject to back taxes. The general rule about tax homes is that they will change automatically if your work exceeds 365 days from beginning to end (calendar year is not relevant) in the same general area (like a metropolitan area even at several hospitals).

There is a bit of fuzziness as travel time to and from your tax home is supposed to be considered as part of that 365 days (in real life I doubt a first line auditor would bother or even know). FYI it gets a little more complicated if you work broken assignments - coming back to the same location year after year. 

The more specific rule about a tax home switch is that it changes as soon as you agree to work in the same general area more than 365 days. For example, lets say you do contracts for which you end up working 10 months exactly. If you sign a three month contract, that is the exact point where your tax home switches to that location, even if you end up canceling the contract and not actually working past 365 days.

Now I'm going to guess your "boss" (he is not - just a money conduit) is trying to be clever with a non-dated contract. The problem is that your job (with your boss being the facility) is now open ended and that also immediately shifts your tax home just as if you moved there to take a staff job. Right?

But at whenever your tax home switches, that is the date you are no longer eligible for tax free reimbursements of items such as housing, per diems, and travel. Everything you get from the agency is taxable compensation. Ideally, you want them to fully perform withholding taxes on the entire amount. They won't want to as this actually increases the agency portion of FICA. If they don't, you must claim the additional income on your tax return in the appropriate year.

As a small positive, you will no longer be responsible to pay state income taxes to your prior tax home (you should be filing in both your home state and your work states as a traveler). And you do not owe taxes on those tax free reimbursements you received before the date your tax home shifted. Finally that last sentence is the direct answer to your question. I hope.

[No Stars In My Eyes]

I'm retired and not interested in travel-nursing, but your post, NedRN, was so interesting, and also very clear about the confusing stuff...I just wanted to say I appreciated your answer to OP. Good work!

[NedRN]

2 minutes ago, No Stars In My Eyes said:

I'm retired and not interested in travel-nursing, but your post, NedRN, was so interesting, and also very clear about the confusing stuff...I just wanted to say I appreciated your answer to OP. Good work!

There are not many nurses, working or retired, interested in geek topics like taxes! I appreciate your comment.

[No Stars In My Eyes]

Yeah, well, really, I'm not particularly interested in taxes. I wanted to tell you that your explanations were very well written, not an easy thing to do with complicated issues like "tax homes" (which I've never heard nor thought of!), etc. But I read a LOT and when something so well written comes into my eyeballs and brain, I have to say so. I don't know if you know that you write well, so I wanted to tell you....you DO! ?

[NedRN]

Again, thanks. I didn't define tax home: it is an IRS construct that can be rather complicated. Usually it is simple for most travelers, it is a permanent residence that you travel away from on business. That means the extra expenses you incur because you are away from home are deductible (like housing, restaurant meals, and travel costs). Alternatively if your company, in this case the travel company, establishes you are working away from a legitimate tax home (travelers fill out a housing form with their agency relieving the agency from tax liability) then they can provide "reimbursements" for these expenses in the form of a stipend, no need for receipts like perhaps one might think of a salesman submitting for reimbursement on a sales trip. That saves a ton of paperwork for the company, the employee, and the IRS so a win all round.

Getting into the weeds here that even most travelers don't know, but these "reimbursements" (I used air quotes because there are no receipts) are based on GSA (which I think stands for General Services Agency - a federal agency) published tables annually for every locality in the country that determines what the GSA employees may receive on trips without receipts. This includes lodging and a per diem. Since this is already effectively IRS approved for federal employees, the private sector uses it as well. IRS comes out with a mileage rate every year, usually around 50 cents a mile, that can also be used to "reimburse" private employees as well for their business trips and this turns into a third stipend that travel companies may use as a maximum allowable stipend.

With actual receipts of a reasonable expense (which is why many business travelers do not fly in coach), reimbursements can be quite a bit higher. But nurse travel companies have bread and butter employees and need to make a profit, and certainly don't want to have to process actual receipts, so this simplified system came into being. It is actually the invention of Cross Country around 1992 - then the largest nurse travel company - who called it "Tax Advantage" which serves as a competitive method of increasing take home pay by reducing income taxes and FICA without increasing costs to the agency. Once the rest of the industry saw that CC didn't get hammered by the IRS, they adopted it and it was pretty much universal by say 2005. Interesting story, which I learned from talking to early travel company executives while researching an article for PanTravelers on the history of travel nursing.

Plus spoiler, I picked Cross Country to be my first travel employer because of Tax Advantage. Before I went to nursing school, I was a traveling construction worker for a German company. Every week they provided a cash per diem intended to pay for meals and incidentals (the exact GSA term) so I already had some experience with the concept. At the time, CC was the only agency doing this and it just made sense to me to be able to pocket money for expenses without it being subject to income tax first.

So you see what happens when you encourage me! Lots of verbiage. It is possible to write many thousands of words on subjects like tax home and stipends, and I have written a number of articles on such topics. And it takes thousands of words to fully explain things like tax homes. I never put so much info in forum posts because it is just overwhelming on first exposure. Instead I try to be simple here and refer travelers to articles available on PanTravelers and TravelTax for the full story. So this was intended to be short and simple, and is from my perspective anyway.