Most likely, you aren’t a travel nurse because you deeply love thinking about your taxes. But a little bit of tax education can go a long way to protect your bottom line. The choices you make about where you live, where you work, and even how you spend your time off may impact your tax return.
Here are 5 common mistakes travel nurses make that can mean big losses come tax season.
1. Skimming your contract.
Your contract is one piece of documentation that you really want to make sure you pour over. Assuming that your contract is just fine can lead to surprises down the road. You want not only to pay close attention to the expectations laid out for you in your contract, but also you want to go over your compensation package with a fine-tooth comb to make sure you understand precisely how much you’ll be earning and from what sources.
Check all of the following before you sign on the dotted line:
- How much of your income is guaranteed?
- What are the missed-hours penalties?
- How much of your compensation is untaxed income? Are there any stated contingencies on this income?
- What are the stated contract violations?
- What are the financial consequences if you don’t finish your contract?
If you don’t pay close attention to this document — which provides a financial map for all of your gigs — you can end up with big surprises in April.
2. Not having a tax home.
This is a tax-return killer. The only way you can reap the benefits of the untaxed portion of your income is to have a tax home. You must either work in one metropolitan area for approximately ¼ of your yearly salary and return to it regularly or maintain a permanent home in one metropolitan area and show you have significant financial ties to the area. If you don’t satisfy the basic IRS rules around establishing a tax home, it can cost you big in the long term.
If you make $30,000 of your annual salary in untaxed stipends, you could end up with a $10,000+ tax bill if you’re found to be ineligible for those funds. Stay safe and ensure you have properly established your tax home.
3. Staying in one place too long.
It can be hard to leave an area that you really enjoy. Maybe you’ve set up a nice home for yourself or met a lot of exciting people. And you get offered another travel gig just a few miles away! It’d be so easy just to keep on. And sometimes you can, without financial consequences. But it can be a thorny situation.
If you work too much in one metropolitan area, it can undermine your tax home claim. What’s “too much” is tricky to define, but a good general rule of thumb is to avoid working in one place more than 12 months in any 24-month period.
4. Failing to file tax returns in every state you worked.
It can seem confusing — you have a tax home and you work through an agency that also pays taxes for you — isn’t that enough? But no, you have to pay taxes in every single state you work, no matter where your tax home is and no matter how much your agency pays in taxes. How much you’ll pay depends on a lot of factors — from how long you worked in the state to specific state laws about traveling workers.
Don’t avoid the multi-state tax return just because it seems overwhelming. You don’t want multiple states knocking on your door for back taxes. Pros like the accountants at TravelTax are there to help you sort it all out.
5. Assuming you won’t be audited.
No one wants to live in fear, but you also can’t assume things will work out for the best, especially when it comes to taxes. As a travel nurse, you stick out a bit to the IRS, which makes you more likely than a traditional nurse to face an audit.
Be prepared. Save your contracts, your receipts, and other documentation. Remain organized and ready, just in case. It’s best to behave as though you may be audited and then make it your whole career without that headache than it is to assume you’ll be fine and be caught by surprise by the IRS.
Looking for more travel nursing tax info? Check out our comprehensive article on how it all works.