Travel Tax Rules Frequently Asked Questions

What are the requirements for receiving travel benefits (meal per diem, housing and transportation)?

In order to receive travel benefits, we must expect that the travel nurse will incur travel costs and that his or her work assignment must not be within commuting distance the tax home.

What are the requirements to qualify for tax-free travel benefits?

There are three main tax rules that must be met for these travel benefits to be nontaxable compensation. 1) The travel nurse must have a permanent tax home. 2) The assignment must not be within commuting distance of the permanent tax home. 3) The assignment including extensions may not extend beyond one year. The first rule is complex and can be quite subjective depending on the travel nurse nurse's facts and circumstances. More detailed information for all three rules is available in the Assignment Contract Package and on rnnetwork.com.

What are the consequences if one or more of these rules are not met?

If the travel nurse fails to meet the first rule, all travel benefits must be treated as taxable compensation from the beginning of the assignment. The taxable compensation would include all meal per diems, housing allowances or company paid housing costs, and mileage reimbursements. This compensation would be subject to applicable payroll tax withholding. If the travel nurse maintains a permanent tax home and the assignment is within commuting distance of that tax home, no travel benefits will be paid because it is not reasonable to believe those costs will be incurred. If the one-year limit rule is failed, all of the travel benefits must be treated as taxable compensation as soon as it becomes known that the one-year limit will be exceeded. Generally, it is considered known at the time of the signing of the assignment extension that will make the total length of the assignment (plus extensions) beyond one year. The taxable benefit treatment goes into effect on such signing date and would continue through the remainder of the extended assignment.

When must the Tax Home Representation form be completed?

The Tax Home Representation form must be completed prior to commencement of the travel nurse's first assignment, upon the extension of the assignment, and whenever the travel nurse executes a new Professional Services Agreement. The form should also be completed whenever there is a change in the travel nurse's tax home status. The travel nurse should retain the Tax Home Determination worksheet.

Who makes the final determination on whether the travel nurse has a permanent tax home?

Because the determination of the tax home status is sensitive to the facts and circumstances of the travel nurse and can be highly subjective, the travel nurse (in consultation with his/her tax advisor) must make the final determination and does so with the execution of the Tax Home Representation Form. The Salt Lake City based Tax Department may help clarify the tax rules, but the final conclusion resides with the travel nurse, hopefully in consultation with their tax advisor.

Who monitors the commuting and one-year limit rules?

The recruiter with the consultation of the Payroll and Tax Departments should monitor both of these rules and inform the travel nurse of the status since the tax treatment may be a critical factor in determining whether the travel nurse accepts the assignment or assignment extension. The one-year limit can easily be evaluated prior to each assignment extension, and the time and distance criteria for commuting can be determined from Internet mapping sites such as MapQuest.

Why is the Housing Allowance Representation Form required?

In order to pay a tax-free housing per diem, not only do the requirements listed above need to be met, but the company must also have a "reasonable belief" that temporary lodging expenses are actually incurred by the travel nurse while away from their tax home on assignment. This form provides "reasonable belief".

Tax information contained in this document is not intended to be used, and cannot be used, by any person as a basis for avoiding tax penalties that may be imposed by the IRS or any state. We recommend each taxpayer seek advice based on their circumstances from an independent tax advisor.