Major Guilt Trip Here...
No nurse should be surprised at tax time.
Why?
Because not only are we professionals, but everyone should know where their money is going, how much they should owe or be refunded, and know all of this way in advance.
Fear not if you are in the guilty group of nurses who are in the dark every year and just praying they don’t owe tons of taxes.
This article will teach you how to be savvy about your taxes and will show you in TEN SIMPLE STEPS how to estimate what to expect so there are NO surprises every year during tax season.
Who needs the anxiety? I sure wouldn’t! Let’s dive in and estimate your taxes!
I swear, if you follow along, this will be easier than what we do for work - Easier than trying to get a foley in someone with an enlarged prostate. Seriously!
Let’s Begin
There are TWO ways to do this...
1. Are you trying to estimate your taxes ahead of time, before even starting to travel nurse?
2. Or are you getting ready for tax season presently and don’t want any surprises?
Follow the TEN STEP pathways to begin!
Pathway one
Start here with these TEN STEPS if you are trying to estimate your taxes ahead of time, before even starting as a travel nurse.
First, figure out what the average pay will be in your state and specialty.
E.g. I am an OR nurse and chose Massachusetts for my first state license. At the time contracts for OR nurses in MA were an average of $4,000 USD/week.
Second, decide how long you intend to be travel nursing. Most contracts are approx. 13 weeks.
E.g. My plan was to go for TWO contracts = 26 weeks approx.
Third, look on the GSA website to get an idea of the maximum stipend. It doesn’t need to be exact, just an estimate is fine.
E.g. The stipends for me in Massachusetts were roughly $1,500 per week (this is including meals, incidentals, and housing).
Fourth, deduct the stipend money from the overall amount. Then set that number aside.
E.g. For me, I estimated I’d get contracts for $4,000/week and $1,500 of that is estimate to be stipend money (from looking at the GSA.gov website). This gives us $4,000-$1,500 = $2,500/week of TAXABLE money in U.S. dollars. This also leaves the $1,500/week set aside.
Fifth, apply this new amount you calculated to the number of weeks you expect to travel nurse and work in the United States.
E.g. In the second box, I said I planned to travel nurse for 26 weeks. And in the previous box, we deducted the estimated stipend money. That left me with $2,500 per week that will be taxed. $2,500 x 26 weeks = $65,000 U.S. dollars.
Sixth, find an income tax calculator online for the United States. Then plug in the estimated amount you will make in U.S. dollars for the year. Then look to see the total amounts of federal, state, etc. income taxes you will need to pay.
E.g. I estimated I would make $65,000 working for 26 weeks in Massachusetts excluding stipends (since those are NOT taxed both in the U.S. and Canada). From there, I just googled, ‘Massachusetts income tax calculator’ and a bunch of options came up. See below, I entered ‘$65,000’ under my income. And you’ll see, the calculator shows I will owe an estimated $14,334 U.S. dollars in total taxes. And I will end up with $50,656 + stipends after filing my taxes.
Seventh, we now know what we will presumably owe for the year to the United States. Hooray!
Eighth, that is only for ONE country however. Next, google an income tax calculator for your Canadian province. Then plug in the income you expect to make in CANADIAN dollars (make sure to convert it - which can also be googled by looking up ‘American to Canadian dollars’ and you will get the daily rate) from ALL SOURCES.
E.g. I converted my currency first, so that $65,000 U.S. dollars turns into $88,195.57 in Canadian dollars. Then I googled an income tax calculator for my province (Ontario) and this time, I plugged in the $88,195.57 and also any other sources. So, I have a casual nursing position in Canada and will make an estimated $10,000 from that job. Thus, I will enter $98,195.57 into the Ontario income tax calculator. As you can see, it says I will owe $21,945 in Canadian dollars in income taxes.
Ninth, plug in ‘income taxes’ paid. To do this, convert the amount of taxes the state calculator said you would owe and convert it into Canadian dollars.
E.g. I converted the $14,334 U.S. total income taxes the Massachusetts calculator said I would owe. Then, I converted it to Canadian currency. So, then I will have paid $19,449.16 in Canadian dollars so far (to the United States).
Tenth, you will plug into the Ontario income tax calculator the amount of income taxes you will have to pay.
E.g. Just below, this means I will have paid the United States $19,449.16 (in Canadian dollars). And according to this income tax calculator for Ontario, I can expect, when I file my U.S. and Canadian taxes, I will end up owing Canada roughly $2,496 Canadian dollars (presumably about what I will have paid for with my casual job in Canada).
The total for my example is:
Gross (taxable) = $98,195 CAD
Net = $75,700
PLUS, don’t forget about our friend, the stipend money from way back! It will be roughly $39,000 USD tax-free.
So...
Stipends (39k USD) = $52,917 CAD
Thus, $75,700 (net) + $52,917 (stipends) = $114,700 CAD*
Not bad for 26 weeks, right?
*Minus any housing costs for those 26 weeks.
*Not accounting for an DEDUCTIONS which can really lower your taxable income and help you save lotsa $$$
Pathway TWO
Hopefully you read through the first pathway above.
So, for those who have ALREADY worked in the United States as a travel nurse and want to calculate how much to expect you will pay come tax season, it is very similar but A LOT easier!
The only changes to make are that you will not be estimating your pay or stipends since you will have the actual numbers right in front of you! You will also be able to see how much you have already paid in taxes too - and this article will tell you if you will owe, get a refund, or magically break even.
Instead, you will have a W2 (ie. the American version of a T4) from any American jobs and T4s from any Canadian jobs.
Ensure your W2 NEVER includes your stipends in a taxable box.
But otherwise, your gross income is all listed on these W2s and T4s. Your income tax paid already is also listed on them. So, no need to estimate! Use those amounts and follow the same ten steps in PATHWAY ONE.
And for your year’s total of stipends, just check your LAST paystub for the year and see the year-to-date amount. Just ensure your stipends aren’t on your W2!
Sorry for all the math guys, but it’s money in your pocket so it’s 100% worth it!
There you go! Now you know what to expect!
