Tax Fundamentals for Travelers (TravelCon 2017)
Please remember this is my
interpretation from information presented at TravelCon 2017. If any of this
material is not correct, let me know and I will fix it. This is all new/semi-new
information for me too!
There are currently 25+ agencies under audit as well as numerous
traveling therapists.- The IRS is monitoring social media and having random
interviews with travelers regarding the agencies.
TAX HOME
-Travel agencies are required to screen for your tax home status—they do not police it.
-Travel agencies are required to screen for your tax home status—they do not police it.
Permanent Residence (domicile, legal, historical ties, car
registration, driver’s license, voter registration) DOES NOT equal your tax residence (principle place of
income)
For typical people your tax home is where you have your one job and you
make your money. But we as travelers are the exception. Tax home can default to the
permanent dwelling residence if there are substantial expenses to maintain and
you incur expenses while traveling.
Also to note: you can’t be in one area continuously for 12 months. This
then becomes your new tax home. Break in service rules are important--it is
advisable to take a 7-12 month break before returning to the same location.
·
Also don’t travel in orbit (go to three
different places every year and then rotate between them)—this is too repetitive
and might look like you are determining regular tax homes.
·
Don’t abandon your tax home! You must return to
your home regularly 30 days every year. Keep track of this! (Credit card statements
for proving this are accepted)
If you rent from relatives:
·
Rent must be fair market value
·
Must be claimed on their taxes
·
Need a contract
·
Needs to look, small and taste like the real
thing
You can rent out a portion of your house if you want or limit to
vacation rental but you can never fully rent out your permanent residence.
Otherwise then you have no permanent residence.
Storage Units do not equal a dwelling/residence
RV that goes with you on assignment does not count as your permanent
residence (you must still maintain a residence/pay rent in your tax home)
*note military spouses are different. Ask a travel tax expert about
your specific inquiries.
There is no such thing as a 50 mile rule. You have to be far enough
away to incur lodging expenses. Whatever that means to you… (some companies
maintain this rule just help insure that you are not living at your tax home
and still accepting stipends)
·
You must report all income earned anywhere to
your home state (obligated to give you a break with what you paid at the work
state—although there are some exceptions)
Cross referencing of professional practice licenses and tax returns
happens often—agency reports tax to work state.
*Know that your forms of reimbursement (stipends) are not “income”
Therefore nothing from those wages are put towards social security, and they
can make taking out an income based loan very difficult. They also don't include calcualtions for workmen's comp and disability insurance.
*Reimbursements can be a red-flag for the IRS and can increase your audit risks
Per Diem- maximum an
employer can provide without receipts.
è
Only for lodging and meals
è
You don’t have to pay back the excess
Does getting stipends really make me more money?
è
In short, yes. $1 of taxed you make about .70.
So you would have to make about $1.42 to get $1.00 after tax.
è
TAXED $20 wage for 36 hours/week for 13 week
contract
o
$9360/contract if it was taxed
o
If it is untaxed (multiple by 1.42) it would be $22,651
o
Big difference getting non-taxed money
*If you want to read more about reimbursements on the IRS website publication 463 page 8*
BEWARE:
When recruiters market this as pay enhancers.
Do’s/Don’ts in Documentation for
Taxes
KEEP EVERYTHING FOR 7 YEARS!!
If it is not documented, it didn’t
happen.
If you have already taken it, you had better document it
www.traveltax.com (ask them to
send you an envelope)
Reimbursements:
Per Diems are all reimbursements—they are just in different kinds
They are based on a computed expected cost for the area
1. Meals- Make sure to look
at the GSA rate for your area. If your reimbursement from your contract is less
than the reimbursement the GSA allows for meals you can request the additional amount
when you file taxes. Your documentation is your taxes. Reimbursement for meals cost the agency more than the savings they generate.
2. Housing- not quite like meals. You want to make sure
your company is giving you the most the GSA allows into your housing (over your
meal allowance). This is because if they give you under, you cannot request the
additional reimbursement amount for housing when you file taxes. I keep files from my renting place where I am and the payments I make for rent to my tax home.
3. Transportation- Not a
per diem. All of these claims have to be substantiated. Everything you did you
have to have receipts and mileage for: gas, care, hotel, mileage.
- There is the
aspect of personal choice also in this: if you are going to Seattle from NY and
are going VIA the Grand Canyon this is a personal choice. You document your
mileage but then you determine what your actual mileage would have been if you
were to drive straight through. That is what you do for reimbursements.
-Also a 500/mi day
before a hotel stay is necessary. If you take more stops—document but only
submit for what is reasonable.
Some things you should/should
not save receipts for:
Scrubs, stethoscope, shoes, CEUSs, PO Box, Trailer Hitch, AAA
Keep receipts—not CC statements
--allows for digital copies
Mileage log of when, where, why, what
--you can find an actual log book/index card/smart phone/Google maps
Trips home are deductible!
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