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Understanding Your Travel Nurse Pay Package and Taxes

March 2, 2015

traveling nurse pay packageI was originally drawn to the travel nursing field for the opportunity to travel the country while getting paid at the same time. I knew travel nurses were paid fairly well and had been bombarded with various emails advertising travel nursing pay scales as high as $40 an hour; I don’t know about you, but the combination of a high hourly rate and free housing was music to my ears.

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I am typically not the type of person to do something just for the money, I tend to be more interested in the experience, but I also realize that I have bills to pay too. I didn’t really pay attention to the breakdown of my travel nursing pay, all I cared about was whether or not I had enough money to live and to get from point A to point B.

Fortunately, I had a wonderful travel experience but wish I took the time to really understand travel nursing pay scales, expenses and how to deal with taxes. Many of your recruiters don’t take the time to break these topics down for you so it is ultimately your responsibility to seek out the information and educate yourself.

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Non-Taxable Travel Nurse Pay

The most alluring advertisement travel nursing agencies use to get you in the door is the infamous “tax advantage plan”.  This can also be referred to as per-diem, stipends, reimbursements or a combination of all three. What this basically means is that if you are traveling away from your home for work, there are certain expenses that are tax deductible and certain reimbursements that are non-taxable.

The most common types of stipends or reimbursements that you will hear about in the travel nursing world are referred to as meals and incidentals (incidentals include taxi/bus fares, parking, and tips), lodging or housing stipends, and travel reimbursements which cover your expenses to and from each assignment; other non-taxable items can include retirement plans, license reimbursements and health insurance. When travel nursing companies advertise pay rates, they will often tell you a blended rate. A blended rate combines an hourly taxable wage such as $20 an hour with your non-taxable reimbursements and stipends to give you a higher hourly rate. Here is an example of a typical pay package:

  • $20 per hour – taxable base rate that is reported to the IRS
  • $250 per week for meals and incidentals – non-taxable
  • $2,000 a month for lodging – non-taxable
  • $500 for travel reimbursement – non-taxable

Your blended rate is calculated by breaking down your non-taxable stipends into an hourly rate and adding it to your taxable base rate.  For instance, if you worked 36 hours per week on a 13 week assignment, your hourly rate would look something like this based on the above scenario:

$250/wk for meals X 13 weeks: $3,250
$2,000 per month lodging X 3 months: $6,000
$500 travel reimbursement (one time): $500
Total: $9,750
Divided by total hours worked /468 hours
Non-taxable stipend pay per hour: = $20.83
Add base pay: +$20
Total blended rate: $40.83 per hour

Flex Pay and Rigid Pay

There are two different types of pay packages; flex pay and rigid pay. Flex pay packages allow you to mix and match, add or subtract various non-taxable stipends such as healthcare, retirement, and license reimbursements to your pay package, while rigid pay packages are non-negotiable.  The benefit of flex pay is that you can decrease your hourly taxable base rate and increase your non-taxable earnings by adding more benefits such as 401K. Many travel agencies have to be careful not to enter the illegal realm of wage re-characterization when dealing with flex pay packages. To learn more about wage re-characterization visit traveltax.com.

Travel Nurse Overtime

There are some travel contracts that offer overtime; for example, some agencies will ask you if you want to work 4 days a week instead of 3 days a week. Overtime by law has to be paid time and a half of your taxable base rate. So, if you make $20 and hour, then your overtime pay will be $30 an hour. In the world of nursing, $30 an hour isn’t really that much extra money for an extra shift; however, over the long run it does add up. If this is something you are considering doing than make sure you negotiate a higher taxable rate for lower non-taxable stipends if possible so that you really get more bang for your buck. I have never heard of a part-time travel contract so if you are looking to work part-time than it would be better to consider an agency job in your desired destination.

Disadvantages of non-taxable stipend pay

Travel nursing Pay packageThe allure of low taxable income and high non-taxable income sounds appealing, but there are some potential downsides to this scenario. The first disadvantage comes into play when you are attempting to get a loan. Most banks do not take into consideration stipends and reimbursements when it comes to giving out money, so if you are trying to qualify for a loan, it looks like you only earned $30,000 in one year instead of $60,000.

We also have to take into consideration retirement. I know many of you aren’t necessarily thinking about your social security check right now, but it is important to take into consideration that the social security payments are based on 35 of your highest income earning years; non-taxable money is not considered income.

Last but not least, if you get injured on the job, you only receive 2/3 of your hourly taxable base rate. These are some scenarios to take into consideration when thinking about a travel nursing pay package.

Travel Nursing Pay – Things to Consider

With all things considered, a travel nurses pay rate, is very comparable to a staff nurse’s pay rate. However, there are some out of pocket expenses travel nurses have to be aware of that regular staff nurses don’t have to consider;

  • Most travel nursing agencies do not offer paid time off. If you are thinking of taking a vacation or are taking time off in between assignments then you will not be paid
  • Most travel nurses have to pay for their own certifications such as BLS and ACLS
  • Sometimes travel nursing agencies will not pay for your annual physical and TB tests
  • If you want to take an assignment that is across the country, your travel reimbursement might not cover the entire cost

Just like any of other profession, it is important to budget and prepare for the unknown. Take care of yourself make sure you are well organized.

What is an “IRS Tax Home”?

In order to qualify for these non-taxable stipends or reimbursements, one must maintain what the IRS calls a tax home. A tax home is your place of residence that you maintain and pay for while you are out on your travel assignment. Ideally, the IRS would like a travel nurse to take an assignment somewhere and then return to their tax home where they maintain a PRN or full-time nursing job.

Most travel nursing agencies will have you sign a form stating that you do have a tax home. If you do not have a residence that you are planning on maintaining when you are traveling, you will be referred to as an itinerant worker. As an itinerant worker, you will be required to pay taxes on all income earned including stipends and reimbursements. When applying with different travel agencies, make sure they are aware of your itinerant status. You can get more information about tax homes here.

Tips to Make Traveling a Snap

All of this talk about taxes and the IRS can be a little scary. Here are a few easy tips to follow to make your traveling experience a little less complicated:

  • Maintain a mileage log. You will have to write down you odometer reading the beginning of the year on January 1 and again at the end of the year on Dec 31. If you start traveling in the middle of the year you can look back at your maintenance records for previous odometer readings. You must also document your mileage to and from your place of employment.  Click here to print a mileage log.
  • Return to your tax home in between assignments if possible or at a minimum of once per year. Document when you travel back to your tax home. Here is a travel log for your trips back home.
  • Maintain a PRN or agency job in the same vicinity as your tax home. The IRS would like to know that you do business on a regular basis where you live.
  • There is no need to keep track of meal or grocery receipts. The IRS gives you a set stipend for meals. If you exceed the stipend you are considered to be living above your means and will not be reimbursed.
  • Keep a copy of all of your travel contracts. Make sure they have a beginning and ending date on them. This proves that you were really working on a temporary basis.
  • Don’t work in a city more than 12 months in a 24 month period. The IRS will think you abandoned your tax home.
  • There are tax people who specialize specifically in travel nursing. I recommend getting in contact with these people prior to starting your assignment. If you want to tackle this on your own then I recommend getting organized. Here is an organizer that helps you keep track of all your tax information;

Don’t let the IRS or financial aspects of travel nursing scare you.  Travel nursing should be an enjoyable experience not an accounting nightmare.

As with any tax issues, you should seek advice from a licensed tax professional before filing. This article only offers suggestions and isn’t meant to be tax advice. We leave that to the pros.

Professionals can help you through this experience in combination with educating yourself about nursing pay packages. It sounds complicated in the beginning, but the more you learn the lingo, the more prepared you will be to negotiate your next travel contract.

 

Get started on your Travel Nursing Adventure today. TravelNursing.org 

By Crystal Gustafson, RN

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Crystal Gustafson is a Critical Care Registered Nurse who spent time as a travel nurse in various states including Arizona, Texas, Florida and California. She has recently accepted a system wide float pool position with Exempla Healthcare System in her hometown of Denver, Colorado and also has blog about prevention and education in healthcare. You can learn more about Crystal at Google+ or you can visit her blog at http://grassrootsprevention.blogspot.com/.