Navigating Tax Season as a Traveling Provider
Tax season starts in late January and runs through Tax Day on April 15. Whether you’re a W-2 employee or 1099 independent contractor, it is best not to wait until the last minute to file your return. Be prepared before the deadline with these locum tenens tax strategies.
As a reminder, this article is not intended to give tax advice. We recommend that you work with a tax professional if you are unsure about filing taxes as a traveling medical professional. Federal and state requirements are subject to change, and the information presented may not apply to your situation.
How are my taxes different?
Some traveling nurses and locum tenens may be able to work as W-2 employees, which means the company or recruitment firm will pay taxes on your behalf. There will likely be no change to how you do your taxes because the hard part is done through your agency – they deduct federal and state taxes each pay period and send you a tax form annually that you use to file your return.
However, in many cases, traveling medical providers are considered self-employed 1099 independent contractors. Taxes are not taken out on your income, so you must pay your own federal and state taxes. As a contractor, you will need to pay the federal self-employment tax. Your adjusted gross income (AGI) will determine your tax bracket and how much you have to pay.
State taxes for contractors
As a 1099 contractor, you must file non-resident tax returns for every state you worked in the prior year. Each state has different tax rates, so the amounts you pay will vary. You will also need to pay taxes on your home state as a resident.
Nine states do not require income taxes: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Many traveling medical professionals choose to go to these states so they will not have to file state returns on income.
Travel nursing and locum tenens tax strategies
Most travel jobs allow you a stipend or per diem for travel, housing and meals to cover your living costs while working in a different location. If you maintain a permanent residence, you can be reimbursed for those expenses by your agency, and the money is not considered taxable income.
However, to qualify for tax-free per diems, you must be able to show the IRS that you have a permanent residence or tax home. Essentially, you want to show that you are duplicating living costs by working in a different location.
You can show you have a tax home by meeting two of the following requirements:
- Have regular employment in the location of your tax home
- Spend at least 30 days (consecutive or nonconsecutive) days at your tax home
- Are financially responsible for the home when you are away
You can confirm state residency by keeping your state-issued driver’s license and voter registration while traveling to other hospitals and medical facilities.
Per diems may be included in your hourly pay or compensation package. Talk to your healthcare recruiter to learn how yours will be applied.
You may also qualify for reimbursements on business-related expenses beyond the travel and meal stipends. Talk with your placement agency to see if these items are eligible:
- Continuing education courses
- Certification expenses
- Professional association dues
- Malpractice insurance
You need copies of your records to file your return. Keep track of income and expenses from your assignments, including employment contracts, travel mileage records, housing payments, credit card statements and receipts.
At tax time, you can reconcile your expenses and deductions. Some people use software like QuickBooks to scan their receipts and enter information so everything is in one place and can be accessed easily. Diligent record keeping can protect you in case of an IRS audit.
Find a professional
Doing your taxes as a traveling medical provider can be daunting. You can hire a professional tax preparer to help you with your locum tenens tax strategies. A professional will ensure your returns are complete and correct and that you have received all your qualifying write-offs.
If you plan to work as a travel nurse or locum tenens next year, you can pay quarterly taxes based on your estimated income. That can help you avoid the hefty tax bill in April. A tax preparer can help you determine your estimated taxes and show you how to make payments.
Look for a tax professional with experience with traveling medical providers, so they have experience working with complex returns that require filing in multiple states.
Want to be a traveling medical professional?
TinkBird is a comprehensive healthcare recruiting and job placement firm that can help you find placement as a traveling nurse or locum tenens. We provide support during the offer negotiation process to ensure you receive competitive pay and stipends to help you with travel and housing costs. Contact us to find your ideal travel provider position!