Tax Time, Again

Crunch time. Taxes are due very, very soon. No matter how much I work throughout the year to be prepared for tax season, it still takes hours to get everything organized when April rolls around. Don’t let me fool you, Kate’s the one who handles the finances around here – very smart of her. But, every year, I hope taxes will be painless, they never are. It is an awful, dreadful process, and being a traveling therapist does not help simplify the matter. I hope you’ve filed your taxes already, but if not, here are a few tips that will help make your tax season a little less painful:

Hire someone who specializes in taxes for travelers

An actual bill I received from the IRS in the middle of writing this very blog…. apparently we made a mistake two years ago. Whoops, my bad.

Having someone do my taxes who understands health care travelers and their financial arrangements is priceless – actually, it’s only $300. A traveler’s taxes are complicated. I work in multiple states each year, have a rental property in Maine, live in Colorado, occasional work as an independent contractor, and receive a lot of tax-free money each year. In my first years of travel, I tried using TurboTax, which charged me a lot of money for all the extra forms I needed. I also tried using someone at H&R Block – he said he could handle my taxes, but clearly had no idea what he was talking about when it came to travel stipends and reimbursements. Hiring a professional who can handle all the moving parts of travel therapy is money well spent.

A quick Google search will find a long list of people who specialize in taxes for travelers. Searching for “travel nurse tax preparation” yields the most results. A tax professional who specializes in travelers should also be able to help you answer all the questions you likely have about your tax home. A good tax-guy/gal should also be able to advise you of the things you can do in advance to help secure your tax home status in the event you are eventually audited. Speaking of which, make sure you ask any potential tax preparer what their responsibility is in the event you are audited. A few tax professionals warranty their preparations so that an audit is done on their time, others will charge you an hourly rate to defend your audit on their preparation.

Track your mileage

It’s easy, but few actually do it. Just keep a memo-pad in your glove box and write down any mileage that pertains to work – for 2016, you can deduct 54 cents for every mile you drive. It’s that simple.

Mileage you can include in your deduction:

  1. Mileage driving between assignments.
  2. Any driving between clinics or other work locations.
  3. In home care, all mileage between the office and patient visits can count towards your deduction.
  4. People living in permanent places commuting to permanent jobs are not allowed to deduct their commute mileage. However, because a travel work-place is temporary, I believe we are allowed to deduct the mileage on our commutes. That mileage can really add up! (You may want to see what your tax professional before committing to this one.)

The exception to the above categories is if you are already reimbursed for your mileage, you cannot claim it as a deduction on your taxes. For example, if an agency reimburses you specifically for your mileage to relocate, you cannot then deduct that mileage from your taxes. Similarly, if you are paid per mile in home health (which I recommend you do negotiate into any home health contract), you cannot claim that mileage. Although, with a federal deduction of 54 cents per mile, if your job reimbursed you less than 54 cents you can claim the remainder. These little bits do add up to a deduction that could make difference over the course of a year.

Keep track of your tax deductible items throughout the year

We have a big envelope that we put receipts in throughout the year. We keep track of the costs of various trips, the price of continuing ed courses, the price for APTA membership, and anything else that could be tax deductible. Frequently we make notes right on the front of our large tax-envelop so when tax season rolls around we aren’t spending hours trying to find the prices we paid for deductible items – this is where the majority of tax-prep time goes in our household. If you can truly be disciplined and keep track of your work-related costs throughout the year, tax preparation is far less painful when tax day comes.

Keep your tax records available to you, wherever you are

We have a fire-resistant file box that always traveled with us. It had everything important in it including our old tax records. The firebox is really heavy, maybe 20 pounds when empty… 35 pounds when full. It never fit quite right behind the front seat of the car on roadtrips. It basically has always been a pain to manage.

In the age of online data, it makes much more sense to scan all of your tax documents into the computer and store them online. If you ever have your taxes questioned in the future, you’ll be glad you have a readily accessible copy of your tax return. There is nothing worse than receiving an unexpected bill or audit from the IRS and having your tax returns back home, hundreds of miles away. When you need proof of your returns, you want it quickly. The general rule is to keep tax records for 7 years, but if it’s all online, I see no downside to keeping them longer… indefinitely.

Good luck, may this tax season be easy on you!

Traveling Therapist Taxes – It’s Complicated

I haven’t shared an email in a while, so here’s one I received recently that I thought offered some insight into the complexities of traveling therapist taxes.

Traveling Therapist TaxesTraveling Therapist: My wife and I traveled for a while but then had accepted permanent jobs, we are considering the traveling therapist life again and this brought up some questions in our minds. We are currently renting in Kansas, but when we go to travel again, we are trying to figure out what we need to do as far as claiming a tax home. I was originally living in my parents’ retirement house in Florida and was paying rent to them. My concern is that I might not have a place to claim as my tax home when we go back to traveling. Have you bought a house? What is the best way for us to claim a tax home?

HoboHealth: Oh man. Good questions, complicated questions, more complicated answers.

A while back, Kate and I bought a cheap condo up in Maine that we thought would be our tax home. We figured it would be an easy return on our money: 1. The market was way low, and we bought the place dirt-cheap 2. We were paying monthly storage fees that would be eliminated by moving our spare furniture into the condo 3. We’d have a nice, solid, unwavering permanent address as our tax home to collect all of our tax-free bene’s.

Unfortunately, at the same time we purchased the apartment, we had racked up a few years in a row returning to the same job in Colorado seasonally in the winter. Apparently, this is one overriding exception to the standard rules for maintaining a tax-home. If the majority of your work is done consistently in one place year-after-year, that becomes your tax home. The example I get from my tax guy is always pro sports players. If a player maintains his permanent home in Green Bay, but plays for the Texans, the majority of his work is consistently in Texas, and Texas is his tax home despite Green Bay being his permanent address.  You see, Texas is his work place, that’s where he consistently makes his money, it doesn’t matter that he lives in Green Bay. This doesn’t apply to most travelers, because they move often enough to avoid establishing a consistent place of work.  Confused yet?

The other thing that completely blindsided us was that Maine was taxing us at 4% income tax on everything we made, everywhere we worked – despite Colorado being our tax home, Maine considered us permanent residents by their law. We owed Maine over $5000 at the end of that first year with a condo there! Bush league, we got hosed. Just thought I would share my convoluted situation to demonstrate some of the complexities of the tax-home issue before actually answering your question.

So, to summarize your situation: You had a tax home established at your parents and were paying them “fair-market” rent to maintain a home there, but then went to live and work in a different state and have been renting a place there. You’re wondering how to establish a new tax home for when you return to traveling shortly. Has it been less than one year? …I’m thinking you may just be able to pay your parents back-rent for the year and file your 2015 taxes at their address, then you can just carry-on with the situation you had.

The other thing I have heard of, but not ever from anyone that I actually know first-hand, is purchasing super-cheap housing in a 0% income tax state like South Dakota or Florida and establishing that as your tax home. If only it were really this easy. My understanding is that there’s a lot of other factors that the IRS looks at to strengthen your claim for a tax home – driver’s license, vehicle registration, memberships (gyms, clubs, etc), bank location – the more things in your life you can put in one place, the better your argument for that place as your tax home. It is not black-and-white.

Now, let’s say you either re-establish your parent’s home as your tax home, or you somehow establish somewhere else as your tax home. Remember this mantra that has helped me keep my life more sane: You live at your tax home, you are only working temporarily at your travel destination. This is an important distinction. Some states want you to get a driver’s license in their state or register your vehicle there after living there 30 days or less – in your case, you are not living there, you are only working there temporarily. If you are pulled over, you should be clear with the officer that you are only in that location working for several months, you live at your tax home location. Clear?

Staffing agencies will try to make these issues very clear-cut. They’ll frequently give you a checklist for tax home and if you are able to check off a certain number of boxes, you are OK in their eyes to receive tax free money. They may tell you if you work 60 miles from your tax home, you are OK to collect tax free money. There are no laws related to travelers that are this precisely defined. The real laws are much more vague and open to interpretation. Do the best you can to strengthen your case of claiming any one particular place as a tax home so you can confidently defend when/if the IRS comes knocking. And when a recruiter assures you that your tax home is legit, remember that the end responsibility is YOURS and yours only.

Your best bet to get your taxes right is to talk to a tax professional who specializes in travelers. Searching for “travel RN taxes” on Google will give you a variety of options. Good luck trying to understand all this stuff, it’s complicated.