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    Travel nurses: How to survive an IRS audit

    IRS summer love letters


    Ah, summertime. Time to leave the Sun Belt before the real heat arrives, get back home before the fall color, catch up with friends and relatives, and open your mail to find an IRS audit!?

    Tax professionals have seen an uptick in audits for healthcare travelers this year, which probably just reflects an overall increase in all IRS audits. Nonetheless, when your name is picked out of the hat, you couldn't care less about the statistics. Unfortunately for the healthcare traveler, you don't fit in a neat little IRS compartment.

    What do they want?

    Almost exclusively, the IRS will be interested in your "Unreimbursed Employee Expenses," such as travel and temporary living expenses and other professional deductions. The rub is that the first thing the IRS requests (or its computers request) is a letter from your employer explaining how and how much the employer reimbursed you under its reimbursement policy.

    Square peg, round hole

    As you are probably aware, your relationship with your travel agency is not a normal employer-employee relationship. While your employer pays you on a W-2, I have yet to find a single agency willing to provide such requested letter and policy—leaving you on your own from the start.

    Without such letter, the IRS is inclined to deny your deductions because it is unfamiliar with your working relationship.

    Isn't it ironic

    In reality, your relationship with your W-2 employment agency is much more akin to a contractor relationship than an employee relationship, since the staffing agency has placed you in a temporary assignment where the contract hospital supervises you.

    The IRS, however, has forced staffing agencies and other industries to pay you as an employee (on a W-2 with all tax withholdings, rather than on a 1099 with no tax withheld) rather than as a contractor to ensure you pay your tax burden "as you go."

    What to do?

    You should seriously consider professional assistance. To win this battle, you will need to convince the government that you are entitled to these deductions as a temporary worker away from your tax home, which requires familiarizing the IRS with temporary contracts, tax-home questionnaires, and your working relationship with your staffing agency.

    Keep your chin up. It can be—and has been—accomplished.

    The preceding discussion is general in nature and should not be considered advice for any individual tax situation. You should consult with your personal tax planning professional for specific guidance relating to your unique circumstances.

    Any tax advice contained herein is not intended to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code.