As a travel nurse mobilizes from assignment to assignment, they will occasionally have mail sent directly to one of the temporary mailing addresses instead of having it forwarded from the main mailing address.
While this may be convenient, it is a recipe for trouble on the tax end. In our practice, we have seen the following scenarios that travelers should be aware of.
Retirement distributions received during assignments.
Most financial institutions are required to designate the state in which any distributed retirement funds are sent. If you arrange to have a check or deposit of a retirement withdraw sent to you at an assignment address, be sure to confirm that the financial institution is not reporting the distribution to the state that the funds are sent to.
When filing your annual tax return, it is a strong possibility that the 1099R that reports the distribution will be coded for the state of receipt and not your home state. Since most states take the position that the 1099 or W2 is correct unless otherwise documented or corrected, a traveler could be liable for taxes to that state.
State revenue agencies audit departments often make the IRS look like a harmless fuzz ball. Since the recession of 2009, state tax agencies and their parent governments have aggressively pursued the smallest shred of evidence that would suggest that a taxpayer has is a resident of that state. The following are just a few examples of events that have triggered state residency assessments among travelers.
W2’s sent to parents home during move between a second and third state. Parent’s home state assessed tax on total income for the year based on W2 address
Pregnant mothers utilizing an out of state hospital for delivery. A resident of one state with family in another state chose to close out her pregnancy near family. State assessed the mother for full year taxes asserting that she was a resident since she used the hospital facilities.
Traveler took assignment in state bordering grandfather’s home state to care for him during off days during terminal illness. For convenience, traveler had grandparent’s address listed on financial mailings. State assessed traveler for taxes as if they were a resident.
Using professional practice licenses as evidence of residency. Starting with California, almost all states with an income tax now cross reference professional practice licenses and their tax return database. If no tax return is found during a year in which the license is active, a letter is sent to the last known address requesting an explanation or a return
Adjacent year return. Often filing in a state one year will trigger an expectation of a return the subsequent year regardless of whether any income was earned.
What happened with these cases? Years later, travelers either discovered tax liens during loan applications or received notices that were sent to the wrong address. One locum client of ours had a six year old, $56,000 lien filed by the state of California that they discovered when applying for a mortgage.
~ Send all mail to the home address and have the mail forwarded or scanned/emailed to you. Practically, if you are truly a traveler, you are only “away from home” and not “moving”. ~ If you subsequently move your permanent residence, be sure that all mail will be forwarded to your new address. Have the landlord or the new homeowners alert you to any important mailings that arrive after your move.
~ Send all mail to the home address and have the mail forwarded or scanned/emailed to you. Practically, if you are truly a traveler, you are only “away from home” and not “moving”.
~ If you subsequently move your permanent residence, be sure that all mail will be forwarded to your new address. Have the landlord or the new homeowners alert you to any important mailings that arrive after your move.
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