How to Avoid Abandoning your Tax Home
*Disclaimer: I am not a certified tax professional
Finally, the last thing we need to be aware of when maintaining our tax homes is making sure we don’t abandon our already established tax home. You have put in the work to establish your tax home as shown in part 1 and part 2, so now, let’s make sure that we don’t abandon this tax home and again miss out on our valuable tax free stipends.
As mentioned in part 2, the first step to not abandoning our tax homes is making sure we are using your tax home regularly and this is done by returning home for the appropriate amount of time per year and making sure we properly document this time spent at home.
The final step in maintaining a tax home is accomplished by maintaining personal ties to your tax home. In other words, you are further proving that you do in fact live in this home and have personal and professional business tied to this location.
There is no magic number of ties the IRS is looking for in order to determine an appropriate tax home. So for us, the best idea is to achieve as many ties to our tax home as possible in the list below.
The more defensible your documentation is, the better. No one is going to be upset they have too much evidence in the case of an audit.
How to Maintain Personal Ties to Your Tax Home
(In no particular order)
- File your taxes in your home state AND file as a nonresident in any of your assignment states. This one is obvious, but you might be tempted to file as a resident when your filing in a state without income tax. Don’t do it. Nothing says I don’t actually live in my tax home like telling the IRS you don’t live in your tax home by filing as a resident in another state.
- Your drivers license address should match your tax home. This one is pretty self explanatory.
- Register to vote at your tax home. It may be tempting to register to vote away from your tax home but try to take the necessary steps to submit an absentee ballot at your tax home if you still plan to vote rather than just registering to vote near where you are on assignment.
- Use one address. It may seem easier to have bank, credit card statements, or other important documents sent to the address you are at, but try to avoid this in most circumstances. Instead, you can either set up a P.O. box at home to have your mail forwarded to you, or you can do what I do and have my dad filter my mail and then as needed, send me the important documents.
- Maintain a home bank account. This should be the bank account that we use for all of our banking. I suggest picking a bank that is near your tax home, but also has branches all over the United States for your own convenience. I personally use Wells Fargo which has been near every city I have worked in.
- Use your tax home address for all insurance, credit cards, banking, and retirement accounts. I know I sound like a broken record, but use your tax home address for EVERYTHING!
- Keep your vehicle registered to your tax address. Your license plates should match your tax home.
- Keep your local primary physician and dentist. Try to plan your check ups or routine medical or dental exams around when you will be home on vacation. No one wants to go to the doctor or dentist while on vacation but this is just another box to check when defending your tax home.
- Notarized Affidavit of Residency. Basically what this is, is a document written by your parents or whoever you live with stating that you do indeed reside there. This document is then notarized by a notary, further proving your residency.
- Pay one or multiple utility bills. Having some bills in your name at home that you pay off regularly helps prove you haven’t abandoned your tax home. You can have your parents or roommates pay you back, but that monthly bill is great documentation showing you do still live at your tax home.
- Get involved. Get out into your home community when you are around and have time. Volunteer at local events or groups, play in some rec sports, live as you would if you didn’t live across the country for work. You have to be home for a few weeks every year, you might as well take advantage of them and give back to the community.
Summary
Again, this list is in no particular order, is not comprehensive, and does not guarantee that you will be able to maintain your tax home in the event of an audit. But what it does do, is continue to build a case for yourself if that dreaded audit does occur.
I have yet to get audited and don’t plan on it, but in the event that it happens I want to have the most documentation and evidence supporting my case as humanly possible. It may be a little bit of extra work up front, but it is well worth it in the end. We are all traveling for the increase in income, let’s not miss out on this by being lazy on the front end.
Conclusion
This concludes the 3 part series on maintaining a tax home. I understand that tax law is boring and often times confusing/hard to digest. So I hope this series helped to ease you into it and provide some actionable tips to put yourself in the best position possible to avoid audit and maximize your income as a traveling healthcare professional.
I follow these rules to the letter and I offer this information up to you, so that you can do the same.
As mentioned, I am not a lawyer or certified tax professional, this is merely the advice that I have learned and what I personally abide by myself. If you have more detailed questions feel free to contact one of the above professionals.
As always, if you have any questions please feel free to comment below or feel free to message me directly here!
