Healthcare Traveler - February 2009 - (Page 30)

Pass the Hat The traveler’s tax home How does this apply to healthcare travelers who have no primary place of income? After all, most travelers are in constant motion. Chances are, you do not stay in the same metropolitan area more than a year and you take geographically diverse assignments. The determination of your tax home follows a different set of rules. Satisfying specific conditions. According to IRS Publication 463, if you have no main place of business or work, then your tax home could be the home where you “regularly live”—if you satisfy the following three conditions: “1. You perform part of your business in the area of your main home and use that home for lodging while doing business in the area. 2. You have living expenses at your main home that you duplicate because your business requires you to be away from that home. 3. You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging.” Of the three criteria listed, you need to satisfy at least two to have a chance at maintaining a tax home. If you satisfy only one condition, you are considered an “itinerant worker”; this means your tax home is wherever you work, and you can’t deduct travel expenses or receive reimbursements on a tax-free basis. Since most travelers do not work at home, they will usually qualify based on the second and third criteria. In fact, most travelers can determine whether they have a qualifying tax home simply by virtue of condition #2. Just ask yourself: Do you have continuing, significant expenses in keeping a home/dwelling while you are away from home temporarily on business? If the answer is no, the chances are that you do not have a tax home, or better, your tax home will be wherever you work, not at your claimed home. (When Congress wrote the laws, policymakers envisioned individuals who were required to be away from their homes temporarily and the work assignments were short enough in duration that it would be unreasonable to move their residences to accommodate work duties.) Duplicate, significant, and substantial expenses. Most travelers can determine whether they have a qualifying tax home simply by virtue of condition #2. Though not explicitly stated, the second criterion assumes that the expenses you have in keeping your primary home are not only duplicated, but also significant and substantial. This concept is important to understand. Let’s suppose someone said that they had a basement apartment in San Francisco that they rented for $100 a month. You’d probably think they were joking, living with their parents, or had connections. The same holds true with the tax home test—token payments to maintain a home, especially between related parties like family is not a “significant burden” worthy of the consideration of a tax home. If you live with your parents rent-free and do not regularly work at home, you fall into the itinerant category, meaning you do not have a fixed tax home. It does not matter whether your parents or friends refuse rent money or are being generous—tax laws govern the presence of measurable and provable financial transactions, not good intentions. Rent to related parties should be within a fair market equivalent that anyone else would pay for the same size and type of accommodations. One related item to keep in mind: Storage units are not dwellings that qualify as tax homes—and neither is the expense of keeping one (or more). Other aspects of a tax home The following are some other aspects of a tax home to consider when evaluating travel opportunities: Working at home. As a traveler, do you need to work at home? If you meet the second and third criteria, then on the surface, you’d satisfy twothirds of the requirements; but working at home allows you to satisfy all three conditions and definitely solidify a claim to a tax home. With this argument, however, there is a potential problem for long-term travelers. The longer you work away from home, a greater possibility exists that the IRS considers you to have abandoned (condition #3) your home. This is why tax advisors who deal in healthcare travel encourage clients to go home on a regular basis. It is one thing to travel for 5 years and come home regularly and another to come home only for a short holiday break. In addition, many staffing companies have requirements that travelers must spend some time at home before they will continue to provide tax-free reimbursements for continuing assignments. To afford some peace of mind—especially if you’ve been on the road for more than 2 years www.healthcaretraveler.com 30 Healthcare Traveler February 2009 http://www.healthcaretraveler.com

Table of Contents Feed for the Digital Edition of Healthcare Traveler - February 2009

Healthcare Traveler - February 2009 Editor’s Desk Contents In a Flash Paws for Thought Field Notes Med Ec-cerpts The Economic Meltdown What Really is a “Tax Home”? Beach Therapy Drug Update Professional Update Advice of Counsel Cityscape Advertisers’ Index Name It Contest Rules On Assignment Tax Facts Dot.com Big Deals Allied Corner Going the Distance Classifieds Tales from the Road

Healthcare Traveler - February 2009

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