Travel nurses, by nature, are gypsies, nomads, and adventurers. Whether it’s visiting off-the-beaten-path locations, like the country’s largest rocking chair, or attempting to visit all the National Parks, travel nursing is all about experiencing something new. However, what happens when 13 weeks in one location just isn’t enough? You can extend your contract. How long depends on you.
Contract Extension 101
There are many reasons a travel nurse extends his or her contract: they love the facility and their coworkers, the location is amazing, or they want to avoid the stress of job searching. Whatever the reason, there are things you should know.
Extending your contract is convenient. There’s no phone interview, no physical, and no orientation. You’re already acclimated. While it’s easy on you and the hospital, it also uses less of your agency’s manpower to send in all your documents, so it seems like a no brainer if you like where you are, to try to extend. There’s also plenty of opportunities to make some additional money. Many agencies offer a bonus for extending your contract. It never hurts to ask, and you don’t want to leave money on the table.
How Does it Impact Taxes?
Good question! Taxes are inherently complicated, and it’s always best to seek tax advice from certified tax professionals. However, we’ve compiled some basics you and your tax accountant should know. For a thorough breakdown, check out NATHO’s most recent travel tax FAQs.
While the IRS has set up specific guidelines for those traveling from home temporarily, they have not set up hard-and-fast rules for the healthcare travel industry due to the highly nuanced and unique scenarios found in this industry. We strongly recommended that your accountant understand these nuances.
We also recommended that you ask your travel nursing agency how they assist travelers in maintaining tax compliance.
A tax home, simply put, is the location of your regular employment. According to NATHO, if you have more than one regular place of employment — hello travel nurses — your tax home can be where you regularly live but will be subject to this 3-factor test: You perform a portion of your business in the vicinity of your home and use that home for lodging while doing business in the area.
- You perform a portion of your business in the vicinity of your home and use that home for lodging while doing business in the area.
- You incur living expenses (mortgage, rent, utilities, etc.) at your home that are duplicated while you are on assignment Away From Home.
- You must meet at least one of the following three criteria to meet this third factor:
• You have not abandoned the area in which your historical place of lodging is located;
• A member or members of your family (spouse, children, domestic partners) are living at the location; or,
• You use the home frequently for your own lodging.
Source: NATHO Travel Tax FAQs, Traveler Version
If you meet all 3 factors, you are deemed to have maintained a tax home and will be eligible for non-taxed reimbursements. Which, for travel nurses, can be a big deal. That includes subsidies like per diems, housing stipend, or travel reimbursements. These only achieve tax-free status when they are expense reimbursements, not earnings since they would be duplicate expenses due to you maintaining a proper tax home. For even more on this topic, we suggest reading this article.
What Happens When A Travel Nurse Stay in One Place is too long?
We spoke to Jean Cook, CFO of Travel Nurse Across America, about tax compliance and she gave pretty good advice. “Pretend you’re the IRS. From their viewpoint, you’re receiving a reimbursement due to duplicate expenses,” she said, “and if you stay for 1 year in one area, the IRS deems you as having moved there.”
There are many myths regarding the minimum distance you can take an assignment to maintain your tax home and reimbursements, but according to Jean, they’re just myths.
According to NATHO, “The IRS has not provided clear guidance in this area, except that a traveler needs to be far enough from his/her tax home so that it would be unreasonable to go home, rest and return to work the next day. In considering what is unreasonable, the IRS looks at individual facts and circumstances, paying close attention to travel time, the actual distance and the traveler’s intentions.” This opens up the issue of assignment distance versus reasonable commutable time, and very much is dependent on each travelers’ unique situation: traffic can make a 50-mile commute take longer than 3 hours, a 50-mile commute may take less than an hour, or a person could take back-to-back assignments within the same geographical region which could trigger an audit. There are just too many variables that make it difficult for the IRS to provide clear guidelines.
What Does This Mean For Me?
That depends on your personal and professional goals. Once that 1-year mark hits, your reimbursements become taxable. It’s essential to sit down and think about the implications of staying somewhere longer than 1 year ahead of time.
Finding a Great Tax Accountant
As mentioned above, it’s crucial that your tax accountant should understand all the nuances and your specific tax situation. Any healthcare travel professional can put themselves at risk of triggering an IRS audit and incurring tax liabilities if they’re deemed not to have met guidelines. Ask them some questions; if they don’t know or don’t have the ability to find out confidently, they may not be the best tax account for you.
- Are they familiar with temporary assignments?
- Are they familiar with travel taxation rules?
- How confident are they with multi-state taxation?
- Do they feel confident in handling your specific situation?
So, how long can a travel nurse stay in one place? It depends entirely on their goals and desire to receive tax-free reimbursements.