Most people don’t relish doing their taxes. But, with a little bit of education and a few smart choices, you can avoid some of the mistakes that make doing taxes a headache for travel nurses. For example, the choices you make about where you live, where you work, and even how you spend your time off may impact your tax return. And in 2020, taxes, like everything else, are operating a bit differently.
Here are 5 common mistakes travel nurses make that can mean big losses come tax season this year — and how to avoid them.
1. Missing your states’ tax deadlines.
As you know, our federal tax season has been moved back a quarter this year due to the COVID-19 pandemic, and the federal filing date is July 15th. But not all states are following in suit. So, here’s a breakdown of state tax deadlines so you don’t miss that crucial filing window.
The majority of states, Washington DC, and Puerto Rico are following the federal government and have extended the filing date to July 15, 2020:
The following states have deadlines earlier than July 15:
Filing deadline: June 15, 2020
Filing deadline: May 15, 2020
Filing deadline: May 1, 2020
Payment deadline: June 1, 2020
The following states are giving you even more time, with filing deadlines after July 15:
Payments Deadline: July 15, 2020
Filing Deadline: October 15, 2020
Filing deadline: July 20, 2020
Filing deadline: July 31, 2020
Alaska, Florida, New Hampshire, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming do not have income tax.
For more information on how COVID-19 may impact your tax filing, check out our 2020 Travel Nurse Tax Guide.
2. 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.
3. 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.
4. 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.
5. 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.
Looking for more travel nursing tax info? Check out our 2020 Travel Nurse Tax Guide.