Taxes can be tricky. Throw in stipends, reimbursements, multiple states, and tax homes, and it gets trickier. As a travel nurse, it’s important to know how to properly file your taxes, especially while working away from home.
Tax-free benefits
As a travel nurse, you’re probably familiar with the words, “reimbursements” and “stipends.”
Reimbursements are work-related expenses you pay out-of-pocket for and are then reimbursed by your employer. As long as you keep a record of your payments, the money you receive back from your employer will be tax-free.
Stipends are a weekly amount included in your pay to cover living expenses. To qualify for these stipends, you must work far enough away that you can’t return home before you need to sleep. Most agencies follow a 50-mile rule to consider nurses for stipend pay, although this can change with the facility. These two pre-requisites lead us to the most tricky requirement to obtain tax-free stipends – a tax home.
Tax Home
To qualify for tax-free stipends, you must establish and prove you have a “tax home.” Joseph Smith, the founder of Travel Tax, defines a tax home on gypsynurse.com as the main place where travelers work and continually earn income. If there is more than one main residence, a tax home is where you have duplicated expenses keeping a home while on assignment.
Tax consultant, Dennis Hicks, in Tax tips for travelers, explains how you can confirm your tax home status. Typically, nurses should:
- Retain proof of mortgage or rent payment
- Keep their car and driver’s license registered in their home state
- Return to their tax home for at least 30 days once a year
Understanding your tax home is also beneficial in knowing how to properly file your taxes.
Filing in multiple states
As a traveler, you must file a non-resident return in each state you work in, as well as your tax-home state, regardless of whether you worked there or not. Your home state will tax you for ALL the income you made this year. Don’t worry though, this is because it will credit you for taxes paid to your work states – meaning you don’t have to pay double. However, if your home state has a higher tax rate, you will have to pay the difference.
File an accurate return
To help you file an accurate return, the IRS recommends:
Gathering all records before beginning your taxes.
These documents can include W-2s, receipts, and proof of rent payments. This specific year also includes letter 6475, which was sent to those who received a third stimulus payment in 2021. Smith recommends that you keep copies of all your travel contracts as well.
Keeping important information together
Throughout the year, keep and collect all important information in one safe place. The IRS suggests a software program for electronic receipts, and file cabinets for paper.
Utilizing tax experts
For the most accurate, and least stressful return, utilize a tax advisor or accountant. Smith advocates you work with someone who is comfortable with multiple states tax laws.
The deadline to file is April 18, 2022. Working with experienced tax professionals can help you accurately file your taxes and get the most from your benefits. Following these tips and tricks will help you rest easy come tax day. Being a nurse is stressful enough, don’t let taxes add to it.
Ready to work with a great team? Apply online or call 1-877-ETHOS-RN.
