Low pay/high per deim

I have seen several reveiws that state they do not like this set-up.  Why is that?  I am new to traveling and don't know all the questions that I need to ask

I don't like it because it seems to me that it would throw up red flags to the IRS.  Who is going to believe that a travel nurse is willing to be paid $20 or less per hour.  Also, there is a set amount that you are allowed per law, depending on the area in which you are traveling.  Therefore, I don't see how it could possibly be legal to pay me more than that amount in per diems/housing stipend.  (There is a government website which shows you these rates.)  I believe it also affects how much money you get should you have to start drawing social security for disability since this is based only on your taxable income.

You make a very valid point, Cathlab.  It does not seem to add up, eh?

I, personally, prefer to use the lower salary (taxable rate) and higher per diem (non-taxable rate).  Traveling for the past 3 years and filing all the income tax returns, I've only been "randomly audited" once.  The "red flag" with the IRS, was part of my claimed travel expenses.  Never questioned was per diem.  Then again, I have a home-base address and house.  Now, if I did not have a home-base, I'm sure this might be a different story.  (I'm definately NOT a tax expert.  I give all my stuff to H&R Block every year)

This would be a great topic for Joseph to cover.  I understand he is on this site, and very well versed on the tax laws.  Hope he might "chime-in" to this Forum.

Mickey

This is a hotly debated topic among many of the agencies and there really is no final answer as to what the minimum wage should be for a number of reasons. This issue will have different meaning among the government agencies such as the IRS, state workers compensation boards, and state unemployment agencies. There was a recent court case involving workers compensation claims of an aircraft painter that worked temporary assignments similar to what we as healthcare travelers do. The agency that he worked for had a number of problems with their policies but the biggest issue was that this individual was paid a minimum wage and then the remaining compensation in per diems. The arrangement was considered a ruse to channel taxable wages to non-reportable tax-free reimbursements and avoid the premiums associated with workers compensation insurance and unemployment. From the IRS standpoint, all that matters is whether there is an active recharacterization of wages into reimbursements. There are a number of situations that can cause suspicion in this area: for instance, if an agency had 10 different employees in the same hospital and in the same specialty area and one nurse makes 15 an hour and 25 an hour in per diems and have a second nurse making 25 an hour +15 an hour in per diems then it's obvious that the determining factor of the taxable wages is the amount per diem that is paid. That would be considered recharacterization of wages.

When companies pay an extremely low-wage, often is because they are adding certain reimbursements like a car allowance that requires receipts and substantiation. Nonetheless, there comes a point in which the wages so low that all free government agencies will become suspicious. At the same time low wages have side effects to the travelers financial condition. One OP has already mentioned the effects upon Social Security-though this is minimal as Social Security looks at the 35 highest years of earnings, but more importantly, it is far more difficult to get a loan for $200,000 house when you only make $10 an hour. There are the additional risk factors of audits due to abruptly low wages on a year-to-year comparison and other factors that space on this forum does not allow further discussion.

The take away from this is there is a point in which the lower wages are a risk. But the debate will go on as to what that number actually is. From a reasonable wage perspective, since the traveler has a national presence versus a state presence, one should look more for the lowest wage the nurse could possibly make within the United States. The most likely would be a new graduate in North Dakota or maybe even Texas. Since those individuals typically start at about $17 an hour, that is my personal benchmark-note this is my personal benchmark and I have no relevant authority to hang my hat on. A number of agencies have been audited that pay lower wages, but since they determined to wage ahead of time and did not allow the traveler to choose between the taxable wage or nontaxable reimbursement, their audits had limited effects.

Hi! I am a new grad PTA and want to start traveling. I have heard a little about this per diem stuff and do not fully understand it. All I got out of it was that if I find my own housing, then the money is tax free or something. Is there any way someone could describe it a little more in detail for me so that I know what questions to ask and what to be suspicious of in a company when they start talking about pay rates?

I also am interested in traveling but will most likely not start until the beginning of 2012.  I would recommend that you browse through each of the forums  on this website - there's  a lot of information that would help answer your questions.

Joseph Smith's TravelTax website has a lot of important information on taxes that I think you would find useful.  http://www.traveltax.com/TravelRN/KnowledgeBase/KnowledgeBaseHome.html

Good luck! 

anmaltman:
Hi! I am a new grad PTA and want to start traveling. I have heard a little about this per diem stuff and do not fully understand it. All I got out of it was that if I find my own housing, then the money is tax free or something. Is there any way someone could describe it a little more in detail for me so that I know what questions to ask and what to be suspicious of in a company when they start talking about pay rates?

What you are being offered are reimbursements using the "per diem method" of reimbursing. Whenever and employ incurs travel costs like transportation, lodging and meals, the employer can reimburse for these items on a tax free basis using standardized maximum rates for loding and meals. What your company is telling you is that you will get a non taxable housing per diem (also called stipend/allowance etc) that you can use to pay for your lodging.

There is one important item that you did not metion- You must have a tax home to qualify for the tax free treatment of these payments. Tax Homes are not the same thing as Permanent Residences. A Tax Home is not where your DLN, car tags, bank and mailing address are located. It has to be a dwelling that you maintain and have a significant financial burden to keep up. When your home expenses are duplicated on the raod (2nd home), then the payments can be tax free (with numerous exceptions)