local work and tax free money

Hey all, I had a question for travelers and recruiters about the industry.   I had a very interesting conversation with a current traveler in the mid west.  This therapist has been traveling for over a year in the same area with the same company.  The therapist was only looking for something local and when I got into tax free money (LMI) and how to qualify she was completely clueless.  She had no idea that she needed a second address and was under the assumption that this was something that the staffing agency took care of.  She’s currently on an assignment 5 min from her perm address and is making over $1600 a week.  She was getting the appropriate amount of tax free money in her check but in no way could qualify.  I have run into this before with some local staffing agencies in TX and FL but I have not seen this kind of a situation in a while. 
 
Have any other recruiters run into this before or have any travelers been part of this or know of other travelers who fall into this category?  I can’t seem to figure out how a staffing agency could be getting away with this.  Just curious, any feedback would be greatly appreciated.  Thanks.      

Probably we should have Joseph Smith answer this but lets test my knowledge......It is my understanding that the burden is upon the taxpayer for correct payment of taxes.  If a company reimburses for non incurred expenses then it is not reimbursement but remuneration, aka wages.  And the wage earner pays taxes on this money and if it is not withheld then they owe it all when they file thier income tax return, penalties may apply.  , Paying "tax free" money is a benefit to the company as it lowers the obligation of the employer for a portion of FICA.  If you are audited and the IRS rejects your defense that "they told me I was entitled to be paid this way" then the wage earner is liable for all the taxes, penalties, etc.  
Plus the qualification is not about having a second address,it is about having a tax home.  There are very specific requirements.  Suggest you review Joseph Smith's website, www.traveltax.com.  
Best bet is to do your own research and make sure you are getting the right information.

Jeremy,
Funny. I have run into several travelers in this same situation.....on my last assignment in TN there was an OT that lived about 30 minutes away from the facility and yet she was a "traveler" there at that building and was recieving tax free money....I tried to explain as best I could the requirements for recieving part of your wages tax free and I am pretty sure she thinks I am an idiot and didn't know what I was talking about. For instance, my husband and I started looking at homes to buy and she plainly states "I do not understand why you would want to pay a mortgage while you are on the road traveling..." Ummm. Yeah. She obviously doesn't understand....and I feel like it is her companies responsibility to inform her about that, but not thier responsibility to make sure she is compliant with the requirements....I referred her to travel tax/Joseph as well to research more information.

Thanks for the feedback.  I thought this was an important post for local travelers.  I do believe that this would completely fall on the traveler and the company would be excluded from any wrong doing. 
 
I have also been referring my travelers to Joseph for tax questions and help.  He has a GREAT website.   

Jeremy,

I agree with Jennifer, it is the responsibility of the company/recruiter to let the traveler know whether they qualify as a “true traveller,” thus being able to benefit from the tax free portion. If the traveler is doing a local contract and lives a commutable distance from the hospital that he/she works at then they are not duplicating their costs of living and would not qualify for anything tax free.

I also refer any of my travelers to Joseph Smith, he’s such a great resource! Thanks for bringing this up..I do think it’s very important information for local travelers to know!

Thanks,
Megan Rienderhoff
Megan.Rienderhoff@clinicalone.com

This is such a timely topic, isn't it!

I just worked this week with Joseph from Travel Tax to sort out my tax situation, and I would recommend Travel Tax to every traveler. I would venture to say that most travelers have little idea of how they qualify for the tax-free per diems and how to make decisions about future assignments based on their desire to maintain a proper tax home. I would not have been able to wade through my complicated mess without Travel Tax's help - I rented out my tax home in the Midwest in July last year and purchased a small house there near my parents in December - all while I had been on two long assignments in CA. I had no idea how to submit it tax-wise.

Joseph will walk you through step by step and will give great advice on what to do for your personal situation to prepare for next year's taxes.  You won't regret trusting him with something as important as taxes!

Thanks for the kudos! We do try.

It is an awful truth that in our tax system, the taxpayer is expected to have a much higher knowledge base than what is reasonable. Occasionally Joe has managed to have an auditor drop some penalties due to the "they trusted their tax preparer defense," but it has never made a dent in the reassessment of taxes. And you can't completely blame all of the recruiters, since they don't have a tax background either. (One of the things Joe does in the off season is have recruiter inservices, so they can be more careful with what they say.)

Yes, go to our website, read, sign up for a free teleconference, attend the Travelers' Conference in October. Remember we are available year round to chat, so if you are having issues, call.

Daina.

I'll chime in and add to what my wife has posted -

The responsibility for determining eligibility is shared.
1) All employers having employees that incur overnight travel expenses must perform a minimum amount of due diligence to ensure that the employee has a tax home that they are working away from and that they have not been working in the same area for more than 12 months. Any failure to do this would be viewed as an abuse of the tax regulations that apply to reimbursed travel expenses.
2) On the traveler side, most agencies will provide a traveler a tax home attestation form to be filled out and signed. This form requires the traveler to declare their tax home status under oath. The majority of these forms should at least contain a clause suggesting that the traveler seek the advice of a tax professional familiar with reimbursements and travel related expenses. Additionally, these forms should never be suggestive of any thresholds like 50 mile rules or phrasing the question in such a way that an answer favorable to the employer is procured.

Unfortunately, in the health care staffing industry as well as other industries that employ mobile professionals, some agencies fail to exert any effort in determining the tax home status of their employees. I've heard a number of ridiculous excuses ranging from "it's none of our business" to, "how's the IRS going to find out anyway?". I think the most disturbing practice in our industry is when a recruiter actively suggests to a traveler that they use fictitious address on the tax home statement in order to look as if they qualify. When confronted with the fact that this is a misrepresentation, the recruiter often replies that everybody else does it. Obviously, this isn't the common practice in the industry, but it's certainly one that has occasionally forced my hand to call the recruiter directly (and their boss), especially when it's one of my own clients.