Travel nurse taxes can be especially tricky. You’re often filing in multiple states and dealing with uncommon concepts like per diems. To help you navigate your travel nurse taxes this year, we spoke with Joseph Smith, tax guru and president of TravelTax. The following nine tips can make filing your travel nurse taxes easier, save you money, and help you avoid future tax liability.
1. Make sure you qualify for all non-taxed per diems
Everyone has to have somewhere to live and something to eat, but since that financial burden may be double for traveling workers, the cost is alleviated through per diems paid to you by your agency on a tax-free basis. However, you can only take advantage of this benefit if you can prove you are duplicating expenses at home and at your work assignment or have a regular job that you return to annually in the same area. Be sure you qualify for tax-free per diems before accepting them as part of your compensation package.
2. Be careful when using tax software
If you’re filing travel nurse taxes in two or more states, everything gets more complicated. Smith warns, “Even with a professional-level software, for multi-state taxes there are overrides that have to be done and you have to know where those overrides are.” This means it’s easy to misread instructions and make mistakes when using programs like TurboTax for filing in multiple states. “Tax software is only as good as the person inputting the numbers,” he says.
3. Keep your contracts (and read them)
Simply enough, Smith says he wishes more travelers would keep their work contracts and read them, because that’s where to find so many answers for your taxes. “When you’ve got a question about how you’re paid, it’s right there,” he says. “If it’s not being done as written then you want to say something, because it has tax implications as well as affecting your paycheck.”
4. Don’t change your address when you travel
If you’ll be filing taxes in multiple states, things can get messy if one of your temporary residences looks like your permanent residence. To keep everything straight, Smith recommends thinking of your work assignments as vacations: “You are not moving, you’re just on a vacation. You don’t change your address when you’re on a vacation — even though it’s a working vacation.”
5. Know what defines a tax home
To qualify for tax-free per diems and deductions, your tax home must meet two out of three of these qualifications:
- Have regular employment in that area
- Have a permanent residence in that area that you are financially responsible for the upkeep of when you’re away
- Plan to return and spend at least 30 days there per year
6. Don’t be surprised if a state wants more information
“States can track things pretty well now, and they’re out for revenue,” says Smith. This means if you’re getting a notice, the government may ask questions to verify your permanent residence or tax home.
7. Keep all your documents together
Smith says a common mistake he finds with travel nurses is that they don’t save their documents. If you’re wondering which documents to keep track of, here’s a handy list. (Note: these should be saved for six years in case of an IRS audit)
- Copies of all contracts
- Mileage log
- Receipts (except grocery/food receipts and gas receipts)
8. Subscribe to a tax newsletter
Smith says that tax laws are always changing, so it’s important to keep up-to-date on tax reforms. For example, the tax regulations on remote work (such as working for a telehealth provider) are evolving and may add complexity to state taxes. He recommends subscribing to a newsletter or the TravelTax blog to stay up to date on the latest tax developments that might affect you.
9. Consider using a tax advisor
A tax advisor can be helpful in filing travel nurse taxes with everything from understanding the original contract to calling payroll offices and agencies. Smith says, “If there’s a problem, I get results whereas if people try to call themselves, they won’t get results.” So if you feel overwhelmed by your taxes, don’t forget that there are professionals who can help.
Following these nine tips will help you in your tax preparation, however, this is not an exhaustive list and every tax situation is unique. So be sure to consult with a tax professional for answers to specific questions about your travel nurse taxes.
The information contained herein is general in nature and is subject to change. Tax information contained in this document is not intended to be used, and cannot be used, by any person as a basis for avoiding tax penalties that may be imposed by the IRS or any state. We recommend each taxpayer seek advice based on their circumstances from an independent tax advisor.
Last updated 01/31/22