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Hey Travel Nurses after hearing some of your conversations, I’m a little scared.
So, over the past couple of weeks I’ve been having a ton of conversations with travel nurses and I’ve been listening to your conversations in those Facebook groups. Some of the advice that you guys are giving to each other is downright scary especially when it comes to taxes.
Obviously, one of your biggest concerns are: how do I keep as much money in my paycheck in my pocket?
The wrong answer is to listen to people that are saying “Oh just claim that all your income is exempt and you’ll be able to take home 10 Gs a week.
Listen, is there such a thing as exempt income? Absolutely. But it needs to qualify. And if it’s not on the list that qualifies, you’re committing tax fraud and guess what? The IRS will catch up with you.
You may think that you’re just a small fish to the IRS. But, something that most people don’t know is the IRS doesn’t typically go after rich people.
The reason being that rich people have lawyers - really good lawyers - that keep the IRS in court for years and years and years and drain their resources.
So the IRS goes after little people like you and me because we can’t afford to stay in court for 10 years disputing our tax returns.
If you think you can make 200 grand a year and only report 60, and then continue to spend as if you made that 200 grand a year - the IRS will find out. They can identify spending patterns that don’t match up with income reported - and they go after you.
Here’s the truth about taxes: taxes are a give to get game.
What do we mean by that?
For you to pay less in taxes today, you have to part with your money today and put it in a place where it’s a-liquid. Meaning you can’t just cash out of it at any time. That is the compromise that the IRS has made with tax-payers.
So what am I talking about?
I’m talking about your 401Ks, IRAs, your HSAs. If you are not max funding these every year if you can, you’re losing out on significant opportunities to reduce your taxable income.
But what about deductions and credits?
Yes, there is a list of deductions and there is a list of credits that the IRS puts out and says “hey if you have had any of these expenses yes you can deduct them.”
Here’s the thing though, because the standard deduction was raised so much in the past few years - more often than not wage earners find that it makes more sense to claim the standard deduction than to attempt to itemize the expenses throughout the year.
Another crazy piece of advice that I hear all the time is “Oh! You should just start an LLC and claim all of your expenses as business expenses.”
Wrong!
If you have a valid business where you’ve got expenses that have accrued because of your business activities or you have income that comes in because of your business activities - then sure! Claim those, those are allotted to you as qualified business deductions.
But if you’re just saying that you’re going to open up an LLC with your state and just claim all of your nursing deductions as business expenses without proving that you’re operating a bonafide business.
Ya did done wrong!
The IRS knows about this stuff and they will re-characterize your income and not only will you have to pay back taxes, you’ll also have to pay fees.
Don’t mess with it.
If you have a business, run a business! Claim those expenses. But if you’re a travel nurse trying to get away with not paying taxes so you open up an LLC. I don’t know what to tell you, you’re going down the wrong path.
Listen, the best thing for you to do is to create a plan for your finances. A holistic plan, and taxes is a huge part of that.
So work with a professional that can take a look at your finances holistically - from your taxes, to your financial planning to your investments.
Make a plan for your money, but don’t commit fraud to do it!
Marlon is a licensed financial advisor at weshfinancial.com and is known as "The Travel Nurse Financial Advisor". Marlon specializes in helping travel nurses crush their financial goals by helping them optimize taxes, accelerate retirement savings, and maximize their investments.