I am a tax resident of Ohio. I want to accept a locum tenens physician job in Northern California (the Bay Area) and will be considered an indepedent contractor. I understand that to get the best tax deductions, the position must be considered temporary and less than 1 year. If I have such a temporary job offer for $180 per hour OR $150 per hour plus a $30 per hour stipend, which is better, ie. results in more take-home pay? I estimate that I will have the following expenses: moving expenses for the job ($600), airplane tickets ($400), rent ($3000 per month), lease car ($300 per month), groceries, dry cleaning, etc. Also does 11 months and 3 weeks quality as less than 1 year? I want to accept the job for as long as possible but still for it to be considered temporary according to the IRS. Thank you.

Zip Code: 94022

Hi. Taking a job for less than a year with the INTENT of returning to the city where you currently live and work should let this Locum Tenens position qualify as a Temporary Job Assignment. That means you can deduct your travel and living expenses during the Locums position directly against your income earned if you are paid as a contractor.

The key is that the contract must originally be for less than a year. Once the contract is extended beyond a year or becomes indefinite, the tax benefits associated with the temporary job assignment ends on that day.

I don't understand your question about getting a salary of $180 per hour versus getting $150 per hour plus a $30 stipend. It seems like you're getting $180 per hour either way. Your goal while working is to earn the most as possible. Yes, the tax rates these days can be as much as 50% on each dollar earned. Even so, you still keep half of every dollar earned.

I hope this helps you out.

Zip Code: 01801

Thank you, Mr. Schwartz again.

I am using a recruiting company to find me a job.

IF I were to take the $150 per hour (paid by the California hospital/clinic) + $30 stipend per hour (paid by the recruiting company), I was told by someone that the stipend portion is tax deductible and not included in my 1099 income.

Is this correct and would this make a big difference?

Thank you,
Karen.

Zip Code: 94022

It sounds like you have the option to take $180 per hour and then pay all your own expenses associated with the Locums position, or you can take $150 per hour and the Locums company will pay your travel and living expenses up to $30 per hour. Assuming it will cost you at least $30 per hour in total to travel back and forth to this location, pay rent while you are there, and pay for food based on the daily per diem rates (available at www.gsa.gov), you would end up in the same place tax-wise assuming you are being paid as a 1099 contractor.

That's because the $30 per hour that the company is paying as a stipend will reduce the expenses that you can claim against that income on your Schedule C. If they are paying you as a W-2 employee, you will most likely be better off taking the $150 per hour and the $30 per hour stipend for expenses due to the Alternative Minimum taxes and certain tax phase-outs.

I'm not sure if I answered your question, but I hope this brief answer helps.

Zip Code: 01801