Travel Tax, LLC has recently published some tax updates that may affect those of us working in the Travel Nurse field.
Have you been in a location on contract for longer than 30 days? The following may affect you.
Mobile Workforce State Income Tax Simplification Act of 2012
The Mobile Workforce State Income Tax Simplification Act of 2012 (S. 3485), was introduced in the U.S. Senate on August 2, 2012 by Senator Sherrod Brown (D-OH). The bill was referred to the Senate Finance Committee. The purpose of the bill is to limit the authority of states to tax certain income of employees for employment duties performed in other states. The Senate version of the legislation, like the version passed by the House of Representatives, provides that a state, other than the state of an employee’s residence, may only tax employees that travel to the “nonresident” state to perform employment duties if the aggregate number of days of employment in the nonresident state during the calendar year exceeds 30 days. Employees traveling to a nonresident state for fewer than 30 days would have no income tax liability in the nonresident state, nor would the employer have a withholding obligation. However, once the 30-day threshold has been reached for the calendar year, the employer would have income tax withholding and reporting obligations for wages earned during all days of presence during the tax year. Under the legislation, the term “employee” does not include a professional athlete, professional entertainer, or certain public figures.
Is your company offering you a ‘Tax Advantage’ program for your pay? Be cautious of potential wage re-characterization.
IRS Issues Revenue Ruling 2012-25 affecting Healthcare Staffing Operations
The IRS recently issued Revenue Ruling 2012-25 which addresses wage re-characterization in the staffing industry. As many of our clients know, the IRS has been auditing at least 12 healthcare staffing firms and apparently there are many more under the thumb. Staffing agencies in other industries have also been audited. The presence of extremely low wages in comparison to extremely high per diem is one of many issues of audit focus along with the due diligence that the employers exercise in assessing the tax home of the employee. One staffing agency is considering reissuing W-2s six years back for employees that are unwilling to provide receipts. The statute of limitations for audits is three years from the due date or filing a return. If the taxpayer has understated their income by 25% or more, the statute of limitations is expanded to six years. If this particular staffing agency restates the earnings of their employees in the fourth fifth and sixth previous year; and the difference in their reported income is more than 25%, these employees will have significant penalties and interest on the additional taxes that will be imposed. In the next newsletter we will be providing a comprehensive review of the current audits in the healthcare staffing industry.
These two examples above are proof that as a traveler, we must exercise caution and understand the tax implications. From Understanding the Tax Home and knowing what kind of records the IRS expects you to keep as well as understanding GSA rates and how they affect you. Ultimately, it’s your responsibility to be in compliance with these (and other) tax laws. Consult with your tax professional for assistance.
Joe Smith Travel Tax Expert and owner of TravelTax, LLC. Joe is a previous traveler and is widely involved and respected in the Travel community.