It’s said that only two things in life are certain, and one of them comes up every April 15. Yes, that would be income taxes. But the pandemic has stripped us of all certainties, including that steadfast date. This year, the filing deadline for 2020 taxes is May 17, 2021.
So even if you’ve been too slammed to think about your tax returns yet, there’s still time to think about the requirements and benefits offered to travel nurses who spend much of their work life away from home. Even if it’s too late to put them in place now, here are a few suggestions to consider or ask a tax professional about before you file.
Where is your Tax Home?
Make sure you can establish your actual, permanent residence as your official “tax home” with supporting documentation such as driver’s license, utility bills, rent or mortgage payment, voter registration, etc. The IRS defines your tax home as “generally, the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home.”
Your tax home is important so you can deduct paid or incurred expenses, including personal car business mileage, meals, lodging, professional attire (i.e. scrubs), and even laundry while you’re on assignment elsewhere. However, working at the same location for one year or longer is considered “indefinite,” making those expenses nondeductible. Be sure to live in your official home between assignments to cement your tax home status.
Don’t Forget Personal Income Taxes in States in Which You Worked
If any state where you’ve completed an assignment levies personal income taxes, you may have to file taxes there as well as in your tax home state — or in those other states even if your state has no personal income tax. The taxable amount for each state depends on the actual time you worked in that location. H&R Block cautions that some states consider you a full-year resident if you work in a state for at least 183 days (six months).
To simplify withholding from your pay, H&R Block suggests getting an exemption form from each nonresident state so your travel nurse agency will only withhold state income tax for the correct state. A number of states have reciprocity agreements that enable you to file only in your home state. Patriot Software has compiled a state-by-state reciprocity list.
Above all else, keep good records. Your agency probably has documentation requirements for reimbursable expenses, and you’ll find those valuable for IRS documentation as well. Refer to IRS Topic No. 305 for information on recordkeeping. For details on allowable travel expenses, refer to IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses.
It’s a good idea to buy an inexpensive compartmented folder to file your receipts and documents by category as you accumulate them throughout the year. IRS Publication 552 offers guidance on the information you should keep for all income and expense categories, not just travel.
Overwhelmed? Hire a Tax Professional.
Because the tax laws are so complex and the time you invest in preparing your return can be spent more pleasurably elsewhere, why not consider hiring a tax professional to do the heavy lifting?
A professional can help you find deductions you may not have considered, sign off on the preparation work, and relieve you of a stressful burden because let’s face it – you don’t need anything else added to your plate.
But don’t just blindly stick an electronic pin in the online Yellow Pages; thoroughly check out the preparer. Nerdwallet.com has some excellent suggestions on vetting the person you decide to trust with your submission to the IRS.
Alternatives to TurboTax and H&R Block for Do-It-Yourselfer’s
If you’re a do-it-yourselfer, you are probably familiar with the top two commercial tax preparation software platforms, TurboTax and H&R Block. But a number of other excellent options are available that might be better suited to your specific needs and budget. Business Insider has done some digging and came up with these alternatives. (For earners with incomes less than $72,000, the IRS partners with some fully free preparation and filing services.)
The Standard Deduction May be Enough to Skip Tax Prep Expenses.
Unfortunately, the cost of preparing and filing income taxes is no longer deductible, whether you go the DIY route or hire a professional tax preparer, but the standard deduction has increased. So unless you have a highly complex tax situation, you may be able to take the standard deduction instead of itemizing and your tax prep expenses will be a wash.