Ok, so you DON'T have a PERMANENT tax home. What would a business savvy person do in this c...

I moved back in with my parents after deciding to travel. I had no idea of all the stipulations revolving the tax free per diem and tax free housing. So, I don't have a permanent tax home by definition. If I don't establish a permanent tax home before leaving for my first assignment, it looks like I will have to keep my tax withholdings on every check very high in order to not end up owing money come tax time. Is it cost effective to travel with no permanent tax home, or would establishing a modest apartment prove to be more advantageous? Advice from both the non-permanent tax home travelers and permanent tax home travelers would be greatly appreciated. Thank you.

For every assignment you’ll need to fill out a permanent tax resident notification form to qualify for a stipend.  The IRS specifically states that you must be paying to maintain your permanent tax residence while you are on assignment. (i.e., rent, mortgage, room and board). It then goes on to say you must either have lived in your permanent tax residence prior to your current employment or you must have a family member utilizing this residence, or you utilize it frequently for the purpose of your own lodging.
 
I would talk with a tax advisor to be sure, and I think Joseph can help; he’s a regular poster on here.  I find that a lot of younger travelers work out a situation where they start paying rent to their parents and use their home as their permanent tax residence.  The IRS guidelines state that payment to maintain your permanent tax residence must be real and substantial.
 
Let me know if you have anymore specific questions about this.
 
   

Thank you, Jeremy. I just talked to a recruiter I've been working with. She said tax would not be a problem on the housing Aureus will be providing as I will not be receiving the check for the provided housing, and it will not show up on my check stub. Now, if I choose to find my own housing and receive the stipend, then it would be taxable as I don't have a permanent tax home. I'm completely fine with Aureus finding my housing as long as its comfortable.

I would double check that.  I could be wrong but I still think that’s a tax free benefit.  Just make sure you’re not getting a MI (meals &incidentals) rate in your check.    

Irivasmt

Whether they pay for your housing or give you a stipend, it is taxable if you do not have a tax home. Providing property (lodging) in place of wages is no different from paying wages. You may want to double check with your recruiter and if they are insisting that your housing would not be taxed when you do not have a tax home, then please forward your recruiters name to me. That would be a serious violation of the tax code if that is their policy. Often though, it is a misunderstading of the terms.

If you attest to the company that you do not have a tax home, they are required to report and withhold on all compensation including any travel related provisions.

You are correct (in principal) that if you pay your parents fair market rent, then you can potientially qualify to claim a tax home. Generally, having a tax home is benefical but you still have to return home regularly so as you are not abandoning your home.

Feel free to post further if you have any questions.

I'm gathering information prior to talking to recruiters about my first travel assignment (SLP, 20+ years including management positions).  I want all of my compensation to be taxed (need to increase my earning years for social security).  Based on Joseph's comments, the fact that I won't have a tax home would make this possible.  Any thoughts as to what the downside of this plan would be (i.e., would companies offer lower hourly to avoid paying SS, Medicare, etc.; would I have to file multiple state tax returns....)?  How have others dealt with this?

The fact that you will not have a tax home requires all of your compensation to be reported as taxable (vs a possibility or choice)

This does not change the fact that you will file in each state that you work AND potentially in the state that you have strong legal ties

Your agency may still pay you on a allocated basis. Lets use a $20/he taxable wage and $20/hr reimbursement example to illustrate this. Generally, you will still have a 20/20 split only the reimbursement portion is taxable as opposed to one with a tax home. There is a reason for this that is highly technical but its something that confuses many travelers. If you can get the $40 rate, that would be good for overtime. The company really cannot do this but take it if you are offered it.

When one does not have a tax home, the goal is to find the cheapest housing to offset the additional taxes. Try not to take the provided housing as the tax on that amount will have to come from the rest of the wages. Better to have the stipend cover the housing and the tax. Just because the company pays for the housing doesn't meant that you do not pay tax on the value of that provision.

Thanks, Joseph.  You confirmed what I suspected.

Joseph,

Would paperwork such as a drawn up agreement be necessary when paying my parents fair market value rent? I've signed leases before, and they are usually very wordy and long. Instead, would my bank statements showing the cashed checks suffice?

Always good to have something in writing with related parties. Does not have to be a dissertation like the majority of rental agreements go. Just what is rented, when, how much and how often.

OK so just to clarify, IF you dont' have a tax home and everything is taxed... it is better to take the subsidy and find your own housing?  That way the taxes come out of the subsidy and not your wages? 

Thanks!
~Apryl

Yes- that is one way to look at it.

If you take the subsidy and find your own housing, you stand a better chance of finding something cheaper and paying the extra taxes through the savings. Taking the housing means that the taxes on the value of the housing comes from the rest of your compensation.

The subsidy and the wages are all wages if you do not have a tax home, regardless of the title.