Limits to Temporary or Travel Status

Basic Concept:

After you start traveling, beware of certain situations that can cause your tax home to shift. You can unknowingly abandon or forfeit your tax home.

Staying too long in one place

The IRS defines any assignment beyond 12 months in a metropolitan area as permanent. This is not an exact measurement, it is based on FORESEEABLE service to the employer in the area and is applied regardless of the number of trips home or short breaks. Below are some cases where this is important.

1) Employee works for 9 months in Los Angeles and then signs a 4 month extension contract. Temporary status ends and tax home shifts at the signing of the 4 month extension since the employee is aware (foresees) that his service in that area will be more than a year 

2) Employee works 12 months, goes home for 30 days and then returns to the same area. Temporary status ends and tax home shifts. Short breaks do not reset the 12 month clock.

3) Employee works 12 months in Burbank, goes home for 30 days and then takes an assignment in Anaheim. Temporary status ends, tax home shifts as employee is still in the same metropolitan area as one can live between the two communities and have a reasonable commute.

***Continual and repetitive assignments in the same metropolitan area reinforces ties to that area and displays an intent to reside there permanently.

Not returning home enough / Abandoning your home

The frequency and length of ones return visits to their tax home is subject to endless debate. In an audit and court trial, the only determining factor is a vague reliance on facts and circumstances. For a traveler that only works one year as a traveler and returns home,  there is really no problem, but the long term traveler faces the dilemma of maintaining the home not only via a paper trail of expenses, but appearances. On one end is the traveler that goes home for a vacation once a year (bad) vs. the traveler that goes home between each assignments (good). In between are many combinations of short and long visits. The question to ask yourself with each assignment is: Am I traveling for a living or away from home. The question may seem redundant, but it is your away from home status that allows you to receive tax free benefits or claim travel deductions. Another good approach is to chat with your neighbor and listen to his questions about your work. Does he think you are home for a visit, but really live elsewhere - or does he think you are back home for awhile.

Related Questions

My company told me to go home for 30 days before I can come back to the same area and that will satisfy the IRS.

A company that has employees that travel for their duties must have a reasonable belief that 1) The employee is away from home and 2) that the employee has not been in the same area more than 12 months. A company can set an arbitrary number of days or miles to make this judgment. That is a requirement for a company but not the rule for the individual.

I like the area. How long should I stay away before coming back.

Generally, the best answer is as long as you stayed. Some tax professionals will rely on guidance that views 3 weeks to 7 months as appropriate returns home or absences from one area. This only views a situation from the perspective of an audit limited to one calendar year. The Statute of Limitations for tax returns is 3 years and 6 years for returns that understate income by > 25%. That means that an IRS Examination can be expanded beyond the year in question which often happens in audits of mobile professionals. If during an examination, it is discovered that a taxpayer has spent greater than 12 out of 24 months in at a "temporary" location then the tax home will be viewed as shifting somewhere along that time period. Occasionally, one can be at the location for year, go away for 3 months and return to the original location for another  3 months (or other similar situations) but often the person that does this has every intention of even staying longer.

What if I go to a new hospital or company in the same area?

Same metropolitan area. Employer and place of service are irrelevant.

Back to Knowledge Base

TravelTax Home Page    E Mail TravelTax

 Voice) 866-272-7871 Fax) 877-TRAVTAX