It’s that time of the year again—tax season. Taxes can be a headache for anyone, especially healthcare travelers who face a more complicated tax situation. Since you may work in multiple states throughout the year, you could have multiple W-2 forms to file, plus non-taxable reimbursements to submit, and then some.
Disclaimer: Fusion Marketplace does not offer professional tax guidance and recommends you consult a certified tax professional for official tax advice.
What’s my taxable income as a traveler?
As if filing your taxes wasn’t complicated enough, now you have multiple W-2s and non-resident tax returns to deal with. Because your job is so unique, healthcare travelers don’t have it easy when it comes to taxes. That’s why we’re here to lend a helping hand.
So, how do you get started with your taxes? First, it’s important to understand your taxable income because it’s not the same as a staffed healthcare employee. Typically, perm staff workers are paid by the hour, and most likely, so are you!
However, as a traveler, you may also qualify for “other income,” or non-taxable stipends—otherwise known as per diems—that help cover travel expenses like housing, meals, and other essential costs. Be aware the only way to be eligible for non-taxable per diems is if you have a tax home—more to come on that later.
Of course, everyone’s pay package will differ, so make sure you read the detailed breakdown to know what makes up your total compensation. Have questions about what that means for you? Reach out to your healthcare staffing recruiter and ask for an explanation of the breakdown.
What’s a tax home?
Whether you receive a tax-free stipend depends on your ability to prove that you have a “tax home.” Tax homes are defined by the IRS as “the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home.”
Unlike your perm home, which is the legal residence where you receive your U.S. mail, register your driver’s license, and register to vote, your tax home is centered around your place of work. If you spend too much time in any geographical area that’s not your tax home, then the IRS may consider that area your new tax home. To avoid this, make sure you never stay in the same region for more than 12 out of every 24 months.
Also take note that your tax home radius only extends to as far as you can commute to work within a day without needing overnight accommodations. For example, if you live in Los Angeles and accept a nursing or allied health job in Anaheim an hour away, then that still falls under your LA tax home. However, if you live in LA and take a job in San Francisco, then you’re safe outside of the scope of your tax home because you’ll need a temporary residence.
To qualify your tax home, you can:
- Prove you have a tax home if your primary area of residence is also your main area of income; or
- Visit your primary residence at least once every 12 months and can provide proof that you pay for the expenses to maintain your perm home
How do you prove to the IRS that you have a tax home? Well, you can do so a couple different ways:
- Maintain a current driver’s license from your tax home state
- Register to vote in your tax home state
- Register your car in your tax home state
- Maintain a bank account in your tax home state
- Keep documented evidence you stay at your perm residence in your tax home state at least once a year
- Keep records that you maintain your perm home year-round like:
- Mortgage or rent payments
- Utility bills
- Home maintenance expense payments
- House sitter payments
- File your resident tax return in your tax home state
Per diems are non-taxable because they typically duplicate common living expenses like rent and everyday meals. So, if you don’t have a tax home, stipends can become taxable since you’re not already paying taxes on a home and other means of living. Avoid the headache and make sure you have a tax home so you can qualify for tax-free per diems.
How do I file my taxes as a healthcare traveler?
Now you know what classifies as your taxable income and how to qualify your tax home, how do you actually file your taxes as a professional traveler? The answer: It depends on the state.
Every U.S. state is different when it comes to filing taxes. Each state has its own tax laws, and some states require travelers file a non-resident tax return in every state they’ve worked in, as well as in their perm tax home state.
If you live in a state that doesn’t assess income tax, like Alaska, Florida, Nevada, South Dakota, Tennessee, Wyoming, or Washington, but you work in another state that does assess income tax, then you need to file as a non-resident in the state(s) you work in. As far as taxes are concerned, a “non-resident” is an individual who temporarily resided in and/or worked in a state at any time throughout the year, although the state wasn’t their permanent residence.
However, if you’re a resident of a state that assesses income tax and work in another state that also assesses income tax, then you need to file in both your resident state and the state(s) you work(ed) in. You’ll need to file a non-resident state tax return if you made money from sources in a state where you don’t live, which includes:
- Wages or income you earned while working in that state
- Out-of-state rental income, gambling winnings, or profits from property sales
- S corporation or partnership income
- Beneficiary income from a trust or estate
- For active-duty military: Non-military income earned outside of your state of legal residence
- If your employer withheld taxes from the wrong state
To make taxes easier on yourself, it’s recommended to work with a professional tax consultant or adviser.
Can I get audited by the IRS?
If you’re wondering if you can be audited by the IRS as a healthcare traveler, the answer is yes, like anyone else. Luckily, there are ways to combat an audit, should it arise.
Make tax season a breeze and keep track of your receipts and expenses for things like:
- Housing and lodging while traveling
- Mileage travel
- Uniform and scrub expenses
- Continuing education units
Keep copies of your important documents and include receipts that show proof of your duplicated living expenses, plus save your work contracts should you ever need them. The statute of limitation can go up to seven years so you’re safe to discard these docs after that timeframe. If organizing and maintaining paperwork isn’t your jam, make digital copies of everything, and store on a USB flash-drive or on your personal computer.
You have many perks as a healthcare traveler—you can decide when you work, where you work, and how you work. But simple taxes aren’t one of the advantages.
As tax season rolls around, look into the best ways for you to file as a travel nurse or on-the-go allied health worker. Now that you know all you need to know about how to file, consult a tax professional and take action to get the best bang for your buck.