Feb. 17, 2010 - As of the publishing of this entry we are in the thick of tax season and many travelers are sorting through their documents to file their returns. There have been many changes to the tax laws over the last couple of years. Below are a few of the changes that will affect travelers for the 2009 tax return and their planning for 2010.
Making Work Pay Credit
Every person that earned income in 2009 will receive a $400 credit on their tax return. Don't get too excited as you have already had the benefit built into your withholding during the year. Even though the credit will show up on your tax return, in spring of 2009, the withholding tables were adjusted downward to reflect a decrease of $400 over the course of the year. In effect, you paid less tax during the year to make up for the credit on the return. This "benefit" created a problem for those that have more than one job as each employer decreased the withholding by $400 through the year while the credit is only for $400. A number of taxpayers with more than one job will wind up without refunds as a result of this.
Per Diems Increase
Per diems are adjusted annually each October. This recent revision was the most significant upward adjustment in years. The base meal allowance of $39 a day is now $46 a day and the high end allowance increased from $64 to $71 a day. If the per diem allowance for meals given by your agency is less than the amounts assigned to the area you work, you can deduct the difference. Since the changes occurred in the last part of the year, you can take advantage of this difference on the 2009 tax year returns.
New Car Purchases Get Preferred Sales Tax Deduction
If you do not itemize on your tax return, you can still take advantage of the sales tax deduction for new car purchases. This applies to new car purchases after February 16, 2009. A new "Schedule L" was created for non-itemizers to claim this deduction along with real estate taxes which are also treated in the same manner.
Standard Mileage Allowance
The standard mileage allowance dropped from 55 cents a mile in 2009 to 50 cents a mile for 2010 primarily due to the decrease in gas prices. This is still a significant deduction opportunity for travelers as many agencies cap travel pay for transit to and from the assignment. For example, if the agency caps the travel pay at $300 one way, mileage driven above 600 miles is deductible.
Expanded Educational Deductions
The American Opportunity Tax Credit is an addition to the list of educational credits already in place. This new credit applies to the first four years of college and includes books and course materials which the other credits do not. Many travelers take online courses while working assignments away from home and this adds to the tax incentives for completing that bachelor's or master's degree.
More Aggressive Audits
Federal and state governments are hungry for tax revenue and a number of state tax agencies are no longer waiting for the IRS to audit returns - they are doing it themselves and with a vengeance never seen before. Since travelers work in an industry that has higher occurrences of audits, keeping good records is paramount, and finding a tax practitioner comfortable with defending returns in audits provides extra assurance.
If history repeats itself, we will see more tax changes in 2010. A good tax advisor can be worth many times more than their fees so be sure to find one that understands the life of a traveler.
About the author:
Joseph Smith is an IRS Enrolled Agent and former travel respiratory therapist whose firm (TravelTax LLC) provides tax preparation and audit representation for the mobile professional. He is a regular contributor to HealthcareTraveler, Locum Life and a speaker at the annual Travel Medical Professionals Convention. For more travel nursing tax advice, visit TravelTax.com.
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