The tax-free aspect of the travel nursing pay package can get really confusing. Different travel nursing companies approach and handle it in different ways. You’ll find many travel nursing companies that refer to the Meals and Incidental Expenditure (M&IE) stipend as one of the components of their travel nursing pay package. Like the rest of the travel nursing pay package, the M&IE stipend can be confusing. Recruiters often use different terms when describing it. Different agencies offer different amounts in the same area. Recruiters often do a poor job of defining it clearly. In the end, travel nurses are often left wondering what’s really going on with this compensation variable.
What is a travel nursing M&IE Stipend?
First, let’s define the variable so we have a clear understanding of what we’re dealing with. The Meals and Incidental Expenditure is one of two components that comprise what the United States Government refers to as “Per Diem”. The second component is Lodging. Per Diem is the daily maximum allowance that government employees can declare for reimbursement on expenses they incur for lodging and Meals and Incidental Expenditures while traveling away from their work stations on government business. Incidental Expenditures are defined as fees and tips given service providers like porters and waiters. Travel nursing agencies use these classifications (Lodging and M&IE) as components in their travel nursing pay packages.
The first point of confusion for travel nurses relates to the terminology used by different travel nursing recruiters and travel nursing companies when referring to M&IE. Travel nurses might hear M&IE referred to as “Per Diem”, or “The Stipend”, or “The Tax Advantage Program” or some other ambiguous term. These terms are ambiguous because they have multiple meanings and none of the multiple meanings refers specifically to M&IE.
For example, “Per Diem” is Latin for “per day” and is also used to describe PRN staffing. A “Stipend” is any fixed sum of money paid periodically for services or to defray expenses. And “The Tax Advantage Program” is a catch-all phrase used to define the entirety of tax-free compensation being offered. So when a recruiter refers to one specific variable, like M&IE, by one of these catch all phrases, it’s easy to see how travel nurses can get confused. It’s like the recruiter is running a “Who’s on first?” skit.
Travel nursing recruiters would be wise to use specific terms when identifying the various components of the travel nursing pay package. They should use the terms “travel stipend”, “lodging stipend”, and “M&IE stipend” when referring to these items. Unless, of course, their goal is to confuse travel nurses, in which case, they’re doing a great job. To guard against this, travel nurses should ask for compensation quotes that itemize the specifics when comparing travel nursing pay packages.
Paying the travel nursing M&IE Stipend
Now that we’ve defined the M&IE stipend, let’s address the confusion surrounding how it’s paid out. The confusion stems from the fact that different agencies pay different amounts. Therefore, travel nurses are left wondering which agency’s method is correct, or which agency’s payout represents a better deal for them. To address this confusion, we return to the GSA Per Diem Rates.
The government sets the Per Diem rates for various cities and counties throughout the country. For example, in the city of Los Angeles, CA the lodging rate is $125 and the M&IE rate is $71 as of the writing of this article. This means that a government employee traveling to Los Angeles on government related business could be reimbursed up to $125 for their daily lodging expenses and $71 for their daily M&IE Expenses. You can view the rates on the General Services Administration’s web site.
Travel nursing companies use the GSA Per Diem rates as a guideline for determining how much of the travel nursing pay package they can provide as tax free compensation for each of these categories. Some agencies interpret this to mean that they can pay these amounts for each day that a travel nurse works during a travel nursing job. Other agencies interpret the GSA Per Diem rates to mean that they can pay these amounts for every day that the travel nurse is away from their tax home while working a travel nursing job.
For example, a travel nursing company might decide that a travel nurse working 3 shifts per week in Los Angeles, CA would be eligible to receive $213 per week for M&IE ($71*3 =$213). Another agency might decide that a travel nurse working a similar contract would be eligible to receive $497 per week for M&IE ($71*7 = $497). The company paying $213 per week for M&IE will undoubtedly offer a higher taxable base rate than the company offering $497 per week for M&IE.
The bill rate for the travel nursing contract in question will also play a role in determining how much an agency offers for M&IE. For example, if the bill rate for a travel nursing assignment is $60 per hour, then the agency might have $45 pr hour left to put toward the travel nursing pay package after all non-pay related expenses have been accounted for. In this scenario, M&IE would take up a very large portion of the travel nursing pay package if the agency paid $497 weekly for M&IE.
$497 per week works out to $13.80 per hour ($497/36 hours = $13.80). That would leave $31.20 per hour to provide lodging, travel, medical benefits, a taxable hourly wage, and anything else the pay package could potentially include. When all the dust settled, the agency would end up offering a very low taxable hourly rate which could get them in trouble for wage recharacterization. Some agencies are willing to take this risk in order to advertise the higher net pay that results from having a greater percentage of pay come in the form of tax-free stipends.
Travel nurse considerations for the M&IE stipend
So, what does all this mean for the travel nurse? Starting with the basics, you’ll always want to compare entire travel nursing pay packages when determining which one is offering more money. You must also ensure that you qualify to receive tax-free payments if you intend to avoid paying taxes on them. If you don’t qualify to receive tax-free payments, then you’d just need to pay taxes on the tax-free stipends at the end of the year.
Finally, you’ll want to make sure that you keep good records of expenses while travel nursing. As you may have noticed, many travel nursing agencies will ultimately pay much less in tax-free money than you actually qualify to receive. Therefore, you may qualify for further deductions on your taxes if you have the records to justify them. Moreover, if an agency is paying very large tax-free stipends and low taxable wages, then they may get audited by the IRS for wage recharacterization and you might get caught up with them. Having the records necessary to justify your tax free income could save you time, trouble and money.
It’s important to note that we are not tax advisers, Certified Public Accountants, or Lawyers. We are not in any way providing any tax advice. All information regarding taxes is informational and intended as a jumping off point. You must seek the help of professional tax advisers to gain a clear understanding of your unique circumstances. We recommend the folks at traveltax.com.