How low should my TAXABLE pay go?
New traveler here!
I am about to take my first assignment and I have a recruiter offering me $14/hr taxable rate.
Is that too low?
What would be the cons if I take that hourly rate?
How we get paid is unique! Part taxable income and part tax free reimbursements. (When we have a true tax home and are traveling away from that home).
In the past companies would be very liberal and pay us really low amounts for the taxable amount (even as low as minimum wage!!) and put the rest of the pot of money towards tax-free dollars.
This could seem awesome. We as travelers make more money.
The recruitment companies pays less in taxes too (they only have to pay certain taxes on the taxed wages and not the reimbursements).
But did they take it too far?
Many say yes!
The premise behind how we get paid is that we are meant to make a taxed wage similar to what we might make as a permanent employee.
Then on top of that we get reimbursements for things like travel, housing, meals. The government looks at us a bit like someone on a business trip. We are duplicating expenses and they help us offset those extra expenses by letting us not pay taxes on that part of our pay.
But the pot of money the hospital/facility is paying for us is not actually big enough to pay us the same as we would make as a permanent employee AND also get tax free reimbursements.
So some companies made that taxable number low. Like- really, really low. And they did this so they could have more money left over to pay us a reasonable tax-free reimbursement for our living expenses.
But if they didn't do this to some degree we would barely get any reimbursement money.
How does this impact the companies?
It is said that they may be more susceptible to being audited and getting in trouble for not paying their fair share of taxes.
It also may make us, as travelers, think - “If they are cutting corners here- where else are they cutting corners for a quick win?”
How does it impact the travelers?
Tax-free reimbursements are NOT part of your pay in any legal way. If you are in a life situation where buying a car or home is on your radar, getting a loan suddenly gets a lot trickier. As healthcare professionals, we look like we are making closer to minimum wage than our true take-home dollars.
If you are a long term traveler this can ultimately impact your social security money. It also would make disability income or unemployment a lot less if (knock on wood) you needed that. This is because anything official like this will only look at your taxable pay as income.
And lastly, many people claim that we as travelers may get dragged into the company audits as employees. So if we are aligned with a more risky company, we might be more likely to get audited with them.
So what should we be asking for?
Just like everything with our industry it’s always a shade of grey.
The average is around $20-22 dollars for our taxable rate and then the left overs go into our tax free reimbursements.
If you are a Therapy Assistant or LPN, these numbers may be a bit lower too. (Closer to $15 an hour average).
So.. who is right and who is wrong?
That is for each traveler and company to decide! It’s one of the joys of starting a staffing company- figuring out where to draw the line (hopefully with the help of some good legal and tax advice).
And the legal and tax advisors also have a whole range of conservative vs liberal interpretations of the IRS so there is no one place that holds the secret safe number. Everyone is guessing the best they can.
And the IRS themselves will audit a company one year and give them a PASS and two years later fail them for the same thing. So it seems to be ever changing as well.
As travelers- we get to decide too! You can decide to not work with companies that are playing the game too risky for your liking (for example, offering $14 an hour). You can also not work with the companies that are too conservative if you want to make a little more tax free money (some pay closer to $30 an hour which really cuts into a good tax-free reimbursement). You get to decide.
For me? As much as I encourage people to stand out. Be unique. Rock this life shining bright.
When it comes to taxes- I would much rather blend on in. I like to stay around that average and out of the more risky edges.
I’ll be unique when it comes to traveling or when I decide on a whim to live in some bright red hair. But my taxes? I’m okay being less seen and known.
Companies and Travelers: Do not use this as your tax or legal advice.
(It's a well researched jumping off point but read this disclaimer! I'm not a tax expert!)
Laura & the Nomadicare Team xo
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