What records should I keep? Record-keeping can be frustrating for travelers, and we realize that. However, if you were audited and did not have those records, you could the tax-free status of the per diems and other reimbursements. Companies do not keep them for you. AND those on-line versions disappear after years. FYI: this is also why we have you save other things like hotel stays while on the road. At the minimum, you need to go to Google maps and print off the calculated distance page.
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While your credit card statements may accurate for preparing your tax returns, it is the actual receipt that the IRS would require from you. Those are covered under the meal per diems and your contract shows that you were away from home. No, he does not need to issue you a receipt! If renting, you need to save gas, and all related receipts and still keep a mileage record.
A leased car long term gets treated as an owned car, so you just need to keep track of miles. Therefore, anything used to obtain the numbers put on the tax return needs to be kept 6 years and you can stretch it to 7 for a one year overlap. If the IRS suspects major issues with unreported income, — and travelers do have a lot of income tied up in unreported reimbursements, — they can then open the audit up to 6 years.
Lastly, if you utilize our workbook to document your assignments and keep the above records , you will have everything you need in an audit situation. Hint, Hint. How long can I stay? When can I come back? Please note that you will not find this guide anywhere in the IRS code. They are notoriously vague with their terms.
As a result, we have striven to develop a few concrete suggestions for travelers.
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They are based on court cases by citing records and audits personal experience. If you follow the guidelines below, you will be in a more defend-able position if audited. The thing you need to look at is 3-fold.
The main point being: 14 days a year is NOT enough! And do not forget, you still need to be maintaining for some sort of residence there! Switching facilities or companies does not reset the clock! In determining how far is far enough to restart the clock, I usually ask if it is common for people who live in Town A to commute daily to Town B and work? I would also like to point out that it is not the state , but the metropolitan area that you need to monitor.
Example: If you have been in San Francisco for 11 months, you cannot even go to Walnut Creek too close for 11 months. But you can go to Modesto, or LA. HOWEVER: if you stay in one state more than 2 years where all of your income comes from that state that state may want to consider you a full year resident and tax you on any additional income like interest, capital gains, etc. Provided that you have maintained your tax home well adequate time and money , your stipends and other tax-free money will not be in danger of being taxed.
It is important to note that on a federal level IRS , there will be no issues, this would be a state issue and would involve different state income tax rates. Do you really want that headache? Remember that there are 50 states out there, go someplace different!
Go somewhere else! We have tried to put in as many variables as possible, without making it confusing.
Most recommendations and tax law interpretations are based on audit experience and court cases, which are available at request. We have general tax info available on the Business and Non-Traveler page of our site. Feel free to go and educate yourself even more. Sorry, it does not exist. No basis in IRS code.
It is just an internal company policy that has been used so much everyone assumes it comes from the IRS. It does not matter if that job is 90 miles away. No end date means it cannot be considered temporary. All indefinite employment is treated as a permanent job. Even though the work agreement extends only for a shift, the employer-employee relationship continues just like any other permanent position.
Understandably, being audited is a significant fear for travelers. While it is true that a traveler has a higher chance of an audit, that is no reason to stay in a boring staff job.
What do you think?
Audits come about for various reasons:. If you have a solid tax home and kept good paperwork, you should not wind up with any financial damage. Just hassle. We cannot stress how important this is. Without a log, you cannot prove that you spent the money your company gave you. In the old days, people kept a physical log, on paper. Today, you can use things like apps that record mileage, or even going to a web-based map site like Google maps , enter the two addresses, and print out the page.
If renting, it needs to be fair market value. As an itinerant a. What they receive in these categories needs to be added back as taxable income on their tax return, or the company can do it for them and include it in their W2 wages. When most travelers decide to ditch the tax home and go itinerant , they usually do not realize what it entails. Not only do all monetary reimbursements get taxed meals, stipends, travel but most of the travel deductions are lost also.
Traveling itinerant can be liberating with the freedom to go anywhere you want and stay as long as you like. Record keeping becomes minimal, and you no longer have to worry about returning home for 30 days a year and losing paychecks for that time period. Also, there are many situations that can cost you more to maintain a tax home than paying the taxes. This is why we as a company try to make sure that becoming an itinerant worker is an informed decision.
Feel free and call us to talk this through. There is one touchy situation when both partners are travelers in regards to housing, and we are posting this table here to give you a heads up. The whys would take too long to explain here. If you are burning with the need to know why, you can give us a call. There is also an app you can download. You may need to hunt for it on their website. Occasionally you may run into a company that uses the High-Low Substantiation rates. These are GSA rates that are averaged into two categories. If you Google the term, you will be able to get the current version.
These are maximum rates that can be given to an employee without an exchange of receipts. The rates are set by the government for every area of the world and are broken down by counties in the US. The rates can be found on various online sites and are set annually. As long as the allowance does not exceed the per diem rate maximum and the company has a reasonable belief that the employee would deduct these expenses without reimbursements, no receipts are required to be exchanged. Per diems are only tax-free if you are working away from your tax home.
And unless you are maintaining your tax home by annual work at home, you need to be able to show you are duplicating expenses at home and at the assignment. These things are not tax deductions remember: mortgage interest is deductible, not the principal. Most people have a residence in one location and pay for that residence days out of the year.
When their job requires them to be temporarily out of town, a second temporary residence must be maintained. Be it a short term apartment or one night in a hotel, this second home is essentially a duplicated home expense incurred to earn income. To relieve this burden, the IRS allows your company to reimburse you for these expenses. Also, renting out your residence to someone else may potentially disqualify it from being a tax home. Feel free to call to talk about your situation.
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In temporary staffing industries, the terms are often used interchangeably. The take away is that you need to clarify what the payment is for. The determination of whether or not it is taxable is based on the Tax Home status of the recipient. Because technically that is what they are; confusion arises in that they are given in advance of expenses instead of afterward. And they are for your away-from-home expenses, not expenses at your tax home. A normal reimbursement process would be:.