Living as a travel nurse is an awesome adventure. Like some beatnik, free spirit, or storied explorer, you’re going where you want, when you want. But let’s face it: that freedom can grind to a halt at tax time. Suddenly, you’re very aware of just how much the IRS prefers workers who keep things nice and tidy. You’re not a desk worker pulling a 9-5 in a cubicle — and you’ve got a way more complicated tax situation on your hands.
If you’re just starting out as a travel nurse, you may feel overwhelmed. What’s in store for you as you file your taxes? See these 5 tax challenges travel nurses often face, and learn how you can handle them.
1. Keep records
It’s a hassle, but keeping records is essential if you’re going to get the most out of your tax return and file accurately. Make sure you do the following:
- Keep a copy of your travel contracts. They’re essential to prove where you worked and for how long.
- Keep a mileage log. Record your odometer reading on January 1 and again on December 31. Make sure you record additional mileage if you drive a second vehicle, a rental, or change vehicles during the year.
- Save receipts. While the IRS will give you a stipend with an upper limit for meal costs, you may need to document other areas where you exceed your stipend.
2. Maintain a tax home
Tax homes aren’t necessarily what you officially call “home.” They’re more like an “economic home base” that allows you to make sure the way you travel for work is accurately represented to the IRS. The IRS defines a tax home as “your regular place of business or post of duty, regardless of where you maintain your family home. It includes the entire city or general area in which your business or work is located.”
Establishing a tax home allows you to take deductions for travel expenses to other cities or states while keeping the untaxed income in your contract untaxed. Travel nurses generally qualify for tax-free stipends if they meet two of the three requirements for tax homes, which are:
- You earn a minimum of 25% of your income in the geographical area.
- You have a permanent residence.
- You have not abandoned your tax home.
So what should you do from a practical standpoint?
- Maintain a regular job in the same vicinity as your tax home (a PRN or agency job works well).
- Establish a permanent residence in your tax home by paying rent or a mortgage.
- Avoid working 12 months out of any consecutive 24 months in a location that is not your tax home. To the IRS, that looks like you’re abandoning your tax home.
- Make sure you return to your tax home at least once a year between assignments. Document your trip.
3. File in every state where you worked
Alaska, Georgia, California, then Colorado? Yep, the fun part of being a travel nurse is you get to move all over! At tax time, though, you’ll face a downside: filing a return for every state.
How much you’ll pay in each state depends on a lot of factors, including how long you worked in the state. States may also have special laws pertaining to traveling workers. Check out these 10 Tips for People Working and Living in Different States.
4. Face down those audits
Don’t panic! It’s true that you’re more likely to be audited as a professional traveler. You may catch the eye of the system if you have a high number of deductions or your wages seem unusually low. The good news is that even if you do get audited, you can take steps to make sure it goes smoothly.
- Save your receipts, contracts and all other tax documentation for 7 years. (The IRS can audit you for up to 6 years after you’ve filed a return.)
- Stay above board. Don’t cut corners, make sure you understand tax laws, and take time preparing your returns. Always work with the mindset that you could be audited.
- Get help. If you’re faced with an audit, consult a professional. They can help you comply with the audit, or, if needed, file an appeal. (Also, see our post on How to Sail Through an IRS Audit: A Guide for Travel Nurses.)
5. Remember to keep up with the regular stuff!
One of the greatest challenges about being a travel nurse at tax time is remembering to see the forest through the trees. Don’t forget to take a step back and remind yourself of the other tax benefits you’re eligible to receive.
- Learn your tax rate for 2018.
- Take a look at this list of 20 popular deductions, like the child tax credit, medical expenses deduction, IRA contributions deductions, and mortgage interest deduction.
Want more advice on how to prepare and file your taxes as a travel nurse? Download our free eBook on the Ins and Outs of Travel Nursing Taxes.
(A final disclaimer: we aren’t tax professionals, and the information provided here is based on a general perspective.)