Welcome to the TravelTax Blog

While you may have read my articles on various websites, or my posts on Facebook pages and other forums, from time to time I like to wax eloquent without fitting my thoughts into someone else’s prescripted format. Some of the entries may be long and a few will simply be rants. Whatever the case, you are guaranteed to find some nugget of tax knowledge fitting for your situation with a dash of sarcasm or philosophy.

Since our clients are primarily engaged in multi state assignments, cross border employment or posted abroad, they share a common connection of working on the road, exploring the world or just planting themselves in a foreign land ….. travelers and nomads at heart.

Be sure to visit our website http://www.traveltax.com

Thanks for reading!

Joseph Smith, EA/MS Tax

Joe_FINAL

 

CA Worker Classification Laws Gone Bad

This article does a good job of showing how the CA laws and court decisions making it harder to work as a contractor are harming those the law was supposed to protect.

With the Gig economy gaining increased momentum during the COVID pandemic, many of these attempts to make everyone an employee are archaic and behind the times. Odd for such a “progressive” state like CA

Wall Street Journal Article About comedians (and others) loosing work

The Payroll Tax Deferral – Just a Short-Term Loan

Recently, the President signed an Executive Order allowing deferral of Social Security taxes starting with pay periods on or after September 1, 2020 until the last pay period ending December 31, 2020. Prior to official IRS guidance that was released this week, the implementation of this Executive Order was vague.

The Order turns out to simply be a deferral, not an exemption like it was presented in the beginning. In other words, what you do not pay now you will have to pay in the first four months of 2021.

Basically, this is the plan- If you make less than 4K bi-weekly (104K a year), you can choose to defer  your Social Security Taxes that you would pay on your income the rest of the year to the first four months of next year (2021). Social Security taxes are 6.2% of your wages so if you make 1K each pay cycle, you can put off paying the $62.50 with each check until December 31 and then pay it back by April 30, 2021. After May 1, 2021, interest and penalties would begin to accrue.

Really just a small, short term, interest free loan.

Should you do it?

Generally, no. First, this puts some employers in a bind as they are now deputized as tax collectors should an employee elect to defer the tax and leave the company before the due date of the payback. Second, the amount is not significant. Even if you did make the maximum of 4K every two weeks, it would potentially be a $1500 liability going into 2021. It is a deferral lasting less than half a year and most people need the loans much longer. Lastly, with all the changes each week with COVID, few people can predict what life will be like on Aril 30.

Will it be forgiven? That is an unknown. Section 4 of the Order instructs the Treasury to “explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.” This is a possibility so for some, it might be worth the gamble. See  https://www.whitehouse.gov/presidential-actions/memorandum-deferring-payroll-tax-obligations-light-ongoing-covid-19-disaster/

Reference: https://www.irs.gov/pub/irs-drop/n-20-65.pdf

Are COVID Assignments Exempt from Social Security Tax?

We have received a number of messages asking if those working temporarily in COVID disaster areas are exempt from Social Security taxes and Medicare taxes (please see image below).

It’s also found here: Tax Withholding for Government Workers

This does not apply to COVID related assignments for two reasons. 1) The page on the IRS website applies to GOVERNMENT workers – working with a staffing agency is not a government employer and 2) these exemption applies to NATURAL disasters, not biomedical disasters.

Congress would have to pass a bill allowing this and right now, they cannot agree which is why you see more executive orders from the President.

Travcon is Moving to Paris Hotel for 2021!

TravCon 2020 has been canceled for the health & safety of
our attendees, their families & patients.

Please join us next September 26-29th, 2021! TravCon is moving to Paris Hotel for 2021! Paris is an amazing venue with luxurious guest rooms, plenty of space for our growing conference, and dead-center in the middle of the Las Vegas Strip. It will be incredible!

For more information go to travcon.org

Help! If I take a Permanent Job, How Will This Affect My Tax Home?

globe covid mask

Life has changed dramatically with COVID, especially life as a traveler, healthcare or otherwise! We’ve had several calls recently from travelers asking: “Due to COVID, travel contracts are scarce, and I’ve been offered a permanent job.  If I take a permanent job outside of my tax home, how will this affect my tax home?”

Taking a permanent job shifts the tax home to that new location unless you have more income from another location. The reality is that you have got to work, and travel contracts are scarce or being canceled, so what do you do? You can take the permanent job for however long you need to; however, your tax home will shift.

If you are planning to go back to traveling after all this blows over, and want to use your previous tax home, then you will mostly likely need to reestablish it.  How do you reestablish that tax home? By earning significant income in the area that is fully taxed. You might ask, what is “significant income”? Well, considering that the traveling life is divided into 3-month intervals and one could work 4 assignments a year. A starting point is 2-3 months of income in that new location.

Really Dumb Tax Articles

ny covid

I have been reading articles like the one linked below and it reminds me yet again, how really ignorant the media is about taxes (or anything else requiring some thought). In fact, the list of tax ignoramuses in my book consists of

  1. Media
  2. Mortgage underwriters
  3. Most investment advisers
  4. Diners at Waffle House

The article decries the fact that NY is taxing the wages of those healthcare professionals who came to NY from out of state to help with the COVID patients. Why is this such a dumb article? The workers in NY would have to pay taxes on the same income to their home state – someone failed to read that memo. If the NY is allowed to tax it, then the home state will credit them for the NY taxes.

I was a Respiratory Therapist for 25 years and working in the worst areas of exposure is the equivalent of combat. I get that and support whatever things can be done to reward those that put themselves in harm’s way during our national emergency. But this is just another example of how the media sensationalizes by omission.

Here is one of the articles: NY Taxing Out of State Healthcare Workers