There’s not much excitement looming around tax season. Sure, if you’re expecting a sizable tax return, that could be fun. But if the threat of an audit is on the horizon, tax season can be a drag.
Your income is complex as a travel nurse. Unfortunately, this can be a red flag to the IRS, so we recommend approaching tax season by hoping for the best and planning for the worst.
Here you’ll learn the risk travel nurses have of getting audited, how to reduce your risk of an audit happening to you, and ways to protect yourself throughout the process.
Table of Contents
- Will I Get Audited as a Travel Nurse?
- What Should Be the Minimum Taxable Wage for Travel Nurses?
- IRS Travel Nurse Rules: What Does the Law Say?
- What Does the IRS Know About Your Income?
- Travel Nurse Audit: Additional Tax Tips for Travel Nurses
- Trusted Nurse Staffing Provides Support for Travel Nurses To Help Make Tax Season a Breeze
Will I Get Audited as a Travel Nurse?
Yes, travel nurses do get audited by the IRS, and sometimes, you’re at higher risk of an IRS audit as a travel nurse because of the high rate of nontaxable income vs. taxable income.
Travel nurses are paid differently than permanent staff nurses. As a travel nurse, you receive hourly pay that is taxed and additional payments — or stipends — that are not taxed. Together, this makes up a travel nurse’s total pay package.
Stipends typically include things like:
- Housing
- Meals; and
- Incidentals
Because these stipends are considered expense reimbursements for working as a travel nurse, they are not considered income and are non-taxable.
To qualify for stipends, you must work at a facility more than 50 miles from your permanent tax residence.
At Trusted Nurse Staffing, our team will help you negotiate contracts and wages and offer a simple way to keep track of your records to make tax season a breeze. Interested in getting
started with our agency? Check out Pronto to search for available travel nurse contracts in many cities.
Please note: We are not legal experts and always recommend talking to a tax professional.
Why Are Travel Nurses at a Higher Risk of Getting Audited?
As a travel nurse, you aren’t paid a typical base salary. Although many travel nurse agencies pay their nurses as W-2 employees, some pay as 1099 contractors. This can look suspicious on paper to the IRS because:
- Your expenses may be unusually high for a lower base pay.
- Your taxable income may be low enough for the IRS to take notice.
- You might have a lot of deductions on your tax return.
However, not all travel nurse audits are brought on by suspicious red flags. Your travel nurse agency might be audited, which means the IRS looks into all their employees, or you might be randomly selected that year for an audit.
Although travel nurses generally make more money than permanent staff nurses, the odd income flow could be enough to trigger the IRS.
What Are IRS Red Flags?
IRS red flags are anything the IRS might deem suspicious. Typically, tax returns with anomalies are more likely to be flagged for an audit.
Some of the following red flags could be possible reasons travel nurses may get audited more often.
Failure To Report Taxable Income
This is a big mistake.
The IRS has ways of knowing if you withheld any sources of income because they receive copies of income reporting forms (W-2s, 1099s, etc.) employees and contractors fill out.
Then, they match this information to individual tax returns to ensure all income is reported. If this is inaccurate, they may look into what else you could potentially be hiding, raising a red flag to the IRS.
Deductions Are Disproportionately Large Compared to Your Income
If your deductions or credits on your return are disproportionately large compared to your income, this looks suspicious to the IRS, unless you’ve got documentation to back it up.
It’s important to remember that tax reform law did away with many tax deductions of job expenses at the federal level, so double-check your state laws when filing taxes.
Large Deductions for Meals and Travel Expenses
Under the new law, taxpayers can continue to deduct 50% of the cost of business meals if the taxpayer is present at the meal, and it’s not considered extravagant.
Unfortunately, that triple-Michelin star restaurant you wanted to try in your city would not qualify, so you’ll have to eat there on your own dime.
A good rule of thumb is to document everything you think is a possible tax deduction.
What Should Be the Minimum Taxable Wage for Travel Nurses?
There is no law, statute, or IRS regulation specifying the exact taxable hourly wage for travel nurses, so audits and red flags are reviewed on a case-by-case basis.
The minimum taxable wage for travel nurses depends on the contract, but what you should accept depends on you.
It may seem like having non-taxed stipends is a great deal for a travel nurse, but not having this income reported on your annual income could have a few drawbacks.
If you’re ever considering a loan, mortgage, disability payment, or looking to collect Social Security, these institutions will dig into your reported income. Consider carefully if you have any of these financial goals and how banks and financial institutions look at your income.
At Trusted Nurse Staffing, our team of recruiters will help you review and negotiate your contracts before you accept. If you’re unhappy with your wage, let our team know and we’ll do our best to negotiate what we feel is appropriate.
IRS Travel Nurse Rules: What Does the Law Say?
By law, travel nurses and travel nurse agencies must abide by some rules to avoid any issues when tax season rolls around:
Have an Accountable Plan
This is the responsibility of your travel nurse agency. To legally pay tax-free reimbursements, the travel nurse agency must have an accountable plan to document the rules for allowances and reimbursements.
To receive reimbursement for expenses as a travel nurse, their accountable plan must have these three rules:
- Your expenses must have a business connection: You must have paid or incurred deductible expenses while performing services as an employee of your employer.
- You must adequately account for these expenses to your employer within a reasonable timeframe.
- You must return any excess reimbursement within a reasonable timeframe.
As a travel nurse, it’s your job to thoroughly review your contract to see if these three rules are mentioned and included in the reimbursement plan. Your recruiter at Trusted Nurse Staffing can help you comb through your contract to be sure everything necessary is included.
Remember, the IRS is concerned about excess reimbursements, so even if your travel nurse agency has an accountable plan, each expense you plan to deduct must meet these three rules.
It’s good practice to know:
- When and how to report your expenses
- What your base rate of pay will be
- Your expected reimbursement
Follow the 12-Month Rule
To help maintain their tax home status, travel nurses should not work in the same location for more than 12 months in a 24-month period. This guideline helps them continue to receive tax-free reimbursements.
If a travel nurse remains in one location for more than a year, the IRS may consider their new location to be their primary tax home.
What Does the IRS Know About Your Income?
The IRS knows more than you think.
They have everything you included with your tax return, including:
- Mortgage interest
- Dependents declared
- Previous tax returns
- And more
Underreporting your income is a criminal act if done willfully. If an error is made accidentally, the IRS might still penalize you, but you won’t be charged as a criminal.
What Can You Do To Avoid a Travel Nurse Audit?
Sometimes, an audit as a travel nurse is unavoidable, but there are steps you can take to ensure an audit goes smoothly and the IRS doesn’t find a reason to keep digging into your file.
Keep Proper Records
This may sound like youre listening to a broken record — pun intended — but it’s essential to keep your records organized.
As a travel nurse, you are likely already well-versed in documentation and record-keeping, as you often have to present documentation for new contracts or agencies.
A good rule of thumb is to keep your records for seven years. Save and include these receipts in your tax return records:
- Uniform and scrub expenses
- Utilities
- Continuing education courses or certifications
- Housing and lodging expenses
- Travel expenses
Keeping copies of your travel nurse contracts proves that you worked away from your tax home and followed the 12-month rule.
Properly Label Your State of Residency on Your Tax Return
The IRS considers your tax home to be your city of permanent residence or where you regularly live. As a travel nurse, you’re often working in temporary locations for six weeks or longer at a time.
Remember, working in any location for less than 12 months is not considered a move of permanent residence.
This is an important distinction to make on your tax return.
Travel Nurse Audit: Additional Tax Tips for Travel Nurses
To help make tax season less stressful as a travel nurse, we recommend following these tax tips:
- Return home: As mentioned, maintaining your tax home status as a travel nurse is key, so be sure to return home for at least 30 days within a 12-month period.
- File in all necessary states: Depending on your permanent residence and your work states, you might have to file taxes as a resident in your home state and a non-resident in the states you’ve worked in. Some states have reciprocity agreements allowing taxation in only one state, so look into your tax state’s rules before filing.
- Claim tax credits: Claim tax credits for all extra taxes you pay in non-resident states where applicable.
- Hire a tax expert: Lean on the help of a tax professional to ensure you’re filing everything correctly.
Trusted Nurse Staffing Provides Support for Travel Nurses To Help Make Tax Season a Breeze
Are you anxious about finding yourself in a position to survive an IRS tax audit? Trusted Nurse Staffing can support you along the way.
The reason you became a travel nurse, or are thinking about becoming one, probably has nothing to do with the deductions and meal reimbursement — those are just a bonus.
At Trusted Nurse Staffing, we make our payment and invoicing process as simple as possible, so everything is clear and concise when it comes time to file your taxes. Depending on how you prefer to keep your records, travel nurses working with our agency can choose to be paid in numerous ways.
Our payroll app and website make reviewing your pay stubs easy. There, you can also change your address and view your year-end tax documents with ease.
Let the staff at Trusted Nurse Staffing support you along the way. Contact us today to get started with our agency.