By now, you are gathering the necessary important documents to file your tax return. Whether you are filing your own taxes, or using a tax professional, there are some obvious forms that you will need like your 1099, but there are also additional forms such as your contracts, pay stubs, and estimated payment forms that will complete your understanding of your tax situation.

1099s

Do not discard your contracts after you have completed an opportunity. They outline important compensation and reimbursement items required for your tax return. At the minimum, they should clearly set out your remuneration and specific categories of reimbursements, if any. Simply calling a combination of two or more reimbursement categories an allowance, a stipend, or per diem without a breakdown is not appropriate as each category or reimbursement has its own reporting rules.

In addition, your pay stubs should reflect your contract items. When you receive the first check from a new opportunity, compare the data with your contract terms to be certain that they are in sync. Likewise, when you finish a contract, keep the last stub in your files so you can more easily allocate income between engagements.

There are other reasons to keep your contracts: Unless your tax professionals are familiar with the locum tenens staffing industry, they may be confused over the terms of your engagement. Also, in the event of an audit, the auditor will request a copy of your contract. If you are determined not to have a tax home, they will use the contract terms to reassess your taxes for any travel deductions or reimbursements, including the value of company provided housing.

DEDUCTIONS FROM INCOME

When considering deductions, it is important to understand the role of perdiems—the standardized amounts for lodging and meals set by the U.S. General Services Administration (GSA) for each community in the world. Think of them as the amounts that the government often provides its own employees while away from home on assignments. If there is a reasonable belief that you, an independent contractor, will be away from home on location, your staffing agency can pay any amount up to the per diem rate as a reimbursement or forward payment without the burden of exchanging receipts.

Meals. Meal per diems must be listed separately as they are only 50% deductible to your locum tenens staffing company. In the absence of an allowance from your agency, you can use per diem tables as the basis for your own meal deduction. If an allowance is provided, you cannot deduct any meal allowances unless there is proof of a greater expenditure. The meal per diem can be claimed for every night away from home and three-quarters of the amount can be claimed for travel days. Meals are always reduced by 50% so this will show as additional income on a corporate return. As a C Corp, this 50% reduction is taxed at the corporate rate, which creates a disparity between book income and taxable income.

Lodging/housing. If housing is not provided by your staffing company, a lodging per diem may be paid; however, you cannot claim nor pay yourself a lodging per diem. You are limited to actual expenses in the absence of an allowance so as to prevent the funneling of wages through a reimbursement program.

Transportation allowances. Transportation allow-ances have no established per diem tables, so these are reimbursed on a receipt basis. In most cases, IRS standard mileage allowance is the best way to measure your travel expenses versus deducting the actual costs of operating your vehicle.