Taxes for Travel Nurses: Making Filing Easier
Many travel nurses out there may be wondering: are there certain tax publications that would make my tax filing easier?
We have one of the most complicated tax systems in the world and navigating the Internal Revenue Code while keeping abreast of congressional tinkering is a daunting task. In many countries, tax preparation is a very simple task. To illustrate, our northern neighbors in Canada are used to paying about $60 to $75 to have a professional prepare their tax returns while in the U.S., the minimal charge for a specialist can run at least $125. The recent healthcare reform act has added even more complexity to the system, such that any hopes of simplifying the code are even less possible.
As medical professionals, we are familiar with drug reference guides and other manuals, but what is a ready resource for the tax rules? Fortunately, the IRS maintains a library of publications that are a laymen’s guide to the tax code. Each of these manuals are numbered and focus on specific areas of information. For travelers, there are two Publications that contain the most information regarding travel expense deductions: 1542 and 463.
1542
Publication 1542 lists the standard, daily lodging and meal allowances for every location in the U.S. More commonly known as per diems, the list is updated annually in the fall and as required the remainder of the year. This is an important reference for the traveler as it prescribes the maximum amount that an agency can reimburse for lodging and meals without the exchange of a receipt. Additionally, the meal rate for each location is the amount a traveler can claim on their tax return when no meal allowance is provided or the allowance is less than the published rate. With meal rates starting at $46 a day, this is a substantial deduction for a traveler that is on assignment the majority of the year. The lodging rate that is included in the table is only available to the employer. An employee cannot use this part of the table for their own tax return.
463
Publication 463 is a lengthy manual that addresses the rules and regulations for travel, entertainment, gift and vehicle expenses. Chapters 1, 4, 5, and 6 are very important to a traveler.
Chapter one addresses tax home rules. In order for a traveler to receive tax free allowances and housing OR deduct any travel related expenses while on an assignment, the professional must have a tax home and be away from this home while working for the agency. This is the most important part of this publication as many travelers and recruiters misunderstand the concept of tax home, confusing it with a permanent legal residence.
Chapter 4 addresses transportation expenses, which are a large part of traveler’s deductions.
Chapter 5 outlines the rules for recordkeeping. Just like patient documentation, the receipts and data that we save to substantiate the deductions on our tax return must be in an acceptable format. Just because our methodology of documentation makes sense to us, doesn’t mean that it is acceptable to the IRS.
Lastly, Chapter 6 provides instructions on where to record the travel deductions. Generally, this involves Form 2106 and an overview of this form can be found in the chapter.
There are many references that the IRS publishes. The best place to start is the official website of the Internal Revenue Service, www.irs.gov. From there you can search their vast database of information. Keep in mind that some of the explanations can be a tad confusing as they use accounting terms that you may not be familiar to you. As the tax code increases in complexity so does the language of the rules, but however difficult it is, familiarizing yourself with the basics is important. Also, be sure to talk to a tax advisor that understands travelers.
About the author:
Joseph Smith is an IRS Enrolled Agent and former travel respiratory therapist whose firm (TravelTax LLC) provides tax preparation and audit representation for the mobile professional. He is a regular contributor to HealthcareTraveler, Locum Life and a speaker at the annual Travel Medical Professionals Convention. For more travel nursing tax advice, visit TravelTax.com.
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