Meal Per Diem, Housing and Mileage Programs
What are the requirements to qualify for tax-free meal per diem and housing and mileage benefits?
There are three main tax rules that must be met for these travel benefits to be nontaxable compensation. 1) The Healthcare Professional must have a permanent tax home. 2) The assignment must not be within commuting distance of the permanent tax home. 3) The assignment including extensions may not extend beyond one year. The first rule is complex and can be quite subjective depending on the traveler's facts and circumstances.What are the consequences if one or more of these rules are not met?
If the Healthcare Professional fails to meet the first or second rule, all travel benefits must be treated as taxable compensation from the beginning of the assignment. The taxable compensation would include all meal per diems, housing allowances or Company paid housing costs, and mileage reimbursements. This compensation would be subject to applicable payroll tax withholding. If the one-year limit rule is failed, all of these travel benefits must be treated as taxable compensation as soon as it becomes known that the one-year limit will be exceeded. Generally, it is considered to be known at the time of the signing of the assignment extension that will make the total length of the assignment (plus extensions) exceed one year. The taxable benefit treatment goes into effect on such signing date and would continue through the remainder of the extended assignment.When must the Tax Home Representation form be completed?
The Tax Home Representation form must be completed prior to commencement of the Healthcare Professional's first assignment, upon the extension of an assignment, and whenever the Healthcare Professional executes a new Professional Services Agreement. The form should also be completed whenever there is a change in the Healthcare Professional's tax home status. The Healthcare Professional should retain the Tax Home Determination worksheet.Who makes the final determination on whether the Healthcare Professional has a permanent tax home?
Because the determination of the tax home status is sensitive to facts and circumstances specific to the Healthcare Professional and can be highly subjective, the Healthcare Professional (in consultation with his/her tax advisor) must make the final determination and does so with the execution of the Tax Home Representation Form. The final conclusion resides with the traveler. When in doubt, always consult with your tax advisor.Who monitors the commuting and one-year limit rules?
The recruiter with the consultation of the Payroll Department should monitor both of these rules and inform the Healthcare Professional of the status since the tax treatment may be a critical factor whether the Healthcare Professional accepts the assignment or assignment extension. The one-year limit can be evaluated prior to each assignment extension and the time and distance criteria for commuting can be determined from Internet mapping sites such as Google Maps. If any of the aforementioned issues are in question, always consult with your tax advisor.... read more FAQ's on Travel Reimbursement, State Taxes, Commuting and Taxes, One-Year Limitation and Taxes, and Supplemental Compensation
... Tax Forms