Well, if you’re a physician assistant or nurse practitioner who falls into the latter classification, there’s no need to stress the IRS. In this blog post, we take a closer look at a few of the frequently asked tax questions regarding travel costs for advanced practice providers.
(Physicians who have yet to file may refer to earlier posts to read about mileage and vehicle deductions as well as the benefits associated with being an independent contractor.)
Q: What expenses qualify as travel benefits?
A: If you incur expenses en route to an assignment or while on contract because the facility is located beyond a reasonable daily commuting distance from your permanent tax home, then those costs should be considered travel benefits.
Q: When can travel benefits earn a tax-free status?
A: For travel benefits to be classified as nontaxable compensation, they must meet three criteria:
- You maintain a permanent tax home;
- Assignments occur outside a commuting distance of that permanent home;
- The contract length, including any and all extensions, does not exceed one full year.
Q: What happens if you do not meet one or more of these criteria?
A: Let’s address this one criterion at a time.
- If you do not maintain a permanent tax home, then travel benefits must be considered taxable compensation. This includes company-paid housing or transportation. The compensation would be subject to applicable payroll tax withholdings, which could equal approximately 35 to 40 percent of the benefits.
- If a contract takes you to a facility within a commuting distance of your permanent tax home, then there are no travel benefits. What quantifies as a “commuting distance?” Think of it this way: if you can drive home after each shift within a reasonable time, then you are within commuting distance. If you require overnight stays between shifts because the distance between hospital and home is too great to drive on a daily basis, then that is beyond commuting distance.
- If advanced practice providers agree to a contract that runs past the 12-month mark, including consecutive extensions, then travel benefits will be treated as taxable compensation. So if you are considering extending a contract for another few weeks or months, look at the calendar and check with your consultant beforehand to see if the end date falls beyond the one-year anniversary of the assignment’s start date.
Q: When does the Tax Home and One-Year Representation form need to be completed?
A: The Tax Home and One-Year Representation form must be filled out before providers begin their first assignment, and then once a year thereafter. Additionally, any time providers change their tax home status or if the one-year limit will be surpassed, then the form needs to be updated.
One of the best ways to keep tax time as stress-free as possible is to know the facts. If you have questions regarding these or other tax topics, consult with a tax specialist.
Tax information contained here 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.