All Branch Topic (ABT) My fellow FTOS fellowship'ers ... "temporary work assignment" tax deduction?

[pgg]

Just read this article over at WCI:

http://whitecoatinvestor.com/the-out-of-state-fellowship-tax-deduction/

Summary - the IRS allows one to deduct just about everything associated with a "temporary work assignment" of a year or less. I'll copy & paste the quote from the blog:

You can deduct travel expenses paid or incurred in connection with a temporary work assignment away from home. However, you cannot deduct travel expenses paid in connection with an indefinite work assignment. Any work assignment in excess of one year is considered indefinite. Also, you may not deduct travel expenses at a work location if you realistically expect that you will work there for more than one year, whether or not you actually work there that long. If you realistically expect to work at a temporary location for one year or less, and the expectation changes so that at some point you realistically expect to work there for more than one year, travel expenses become nondeductible when your expectation changes.

The comments to the blog tend to lean toward feeling that most 1-year fellowships would NOT qualify, because civilian fellows typically get paid by that hospital and become employees of that system. I.e. it's a job change/move, not a temporary work assignment.

But I think one-year military FTOS fellowships, like the one I'm about to start, would qualify.

Same employer - my job is still the US Navy and they're explicitly, excruciatingly, repetitively clear that I still belong to the Navy (they prohibit moonlighting, make me do the PFA 2x/year, I'm subject to drug tests, leave/travel policies, etc). I have orders to move to another state for a period that will not exceed one year. Fully expect to turn around and go right back to the same hospital after fellowship.

I'm maintaining a residence and household at my current duty station for the year (kids are in high school and it's just ~3 hours away). I'll be traveling home most weekends.

This seems to be a very clear "temporary assignment" away from home, not exceeding 1 year, which means just about everything I spend there will be deductible.


100% of lodging, so the apartment I rent will be a $16K deductible. Utilities. Garbage. Parking. Internet.

Mileage between that apartment and the hospital (although this won't do me any good since I'll walk every day).

Even meals. Capped at 50% ... but that's 50% of the IRS per diem rate of $59/day. Another $10,767 deduction.

Dry cleaning. Unspecified "ordinary and necessary" expenses.

All of that well in excess of the 2% AGI floor for these deductions.


I have some more research to do on this, but it looks good.

Any other FTOS fellowship goers use this in the past, or plan to use it this year?

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[J-Rad]

So Big Blue finally gave you the fellowship you wanted? Congrats!

 

[pgg]

Finally.

 

[Monty Python]

Congrats on your selection! I would certainly argue your unreimbursed FTOS expenses are deductible, with the caveat it might get sticky if you're technically being sent PCS vice TDY. TDY is clear-cut, not sure about PCS.

In general you can take unreimbursed job/business expenses off your taxes if you itemize. You list your expenses on an IRS form 2106, which feeds onto Schedule A of itemized deductions. You might be able to use the 2106-EZ form.

Form 2106 instructions (also mentions the EZ form):
https://www.irs.gov/pub/irs-pdf/i2106.pdf

Like you noted, you'll lose a deduction amount equal to the first 2% of AGI, but above that you'll recover cents-on-the-dollar equal to your effective overall tax rate. Better than nothing. I do this every year for uniform expenses, state license fees, unreimbursed attendance at professional conferences, etc.

 

[Atlas Shrugged]

Wouldn't this basically mean that all USUHS rotations outside of DMV area could qualify for this? At least for M&IE?

I feel like I'm missing something here.

 

[pgg]

I itemize every year. Another low-mid 5-figure deduction would be most welcome.

Even though it's PCS and not TDY, I think the fact that my household is staying in our current location, which is where I'll return after fellowship, makes this legit.

Factors used to determine tax home. If you do not have a regular or main place of business or work, use the following three factors to determine where your tax home is.

1. You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.

2. You have living expenses at your main home that you duplicate because your business requires you to be away from that home.

3. You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging.

If you satisfy all three factors, your tax home is the home where you regularly live. If you satisfy only two factors, you may have a tax home depending on all the facts and circumstances. If you satisfy only one factor, you are an itinerant; your tax home is wherever you work and you cannot deduct travel expenses.

1 is sketchy. I probably won't do much if anything at my current duty station. But I could - while back at my current home, I could use that time to do some of the endless GMT / NKO garbage.

2 and 3 absolutely fit. So on the basis of those two items alone, I "may have a tax home [at my current duty station] depending on all the facts and circumstances" which would make my work at the fellowship location a "temporary assignment".

If I intermittently am back home and do ANYTHING work-related then 1 applies too, and this seems like a slam dunk legit deduction.

 

[pgg]

Wouldn't this basically mean that all USUHS rotations outside of DMV area could qualify for this? At least for M&IE?

I feel like I'm missing something here.

No, because USUHS pays for their lodging, travel, and meals (per diem) while away on funded TAD. They have no out-of-pocket expenses to deduct.

FTOS fellows don't get any of that. Just the regular paycheck, and moving expenses to/from. Frequently for one-year fellowships the individuals geo-bach it and leave their families at the current duty station, meaning they end up paying for two households. It's true this is optional, but we do incur large out-of-pocket expenses in the process. It appears the IRS says we can deduct those extra expenses.

 

[Ziehl-Neelsen]

I think it's a slam dunk deduction for people like you and me doing sponsored civilian fellowships, and I have been planning to take it during fellowship.

The comments on the WCI article view the deduction through the lenses of civilian residents/fellows who are truly changing employers when they matriculate to a new institution for residency/fellowship. You are absolutely correct that for military folks like us, the employer does not change--only the place of business.

I'm remaining credentialed at my MTF during my fellowship (since I'll easily achieve the credentialing benchmarks during the first 6 months of the year), and I'm exploring the possibility of coming in and helping out with the workload in my former department while home visiting the family (in part to have evidence that I engaged in 'business' in the area of my main home).

 

[pgg]

Thanks -

I doubt I'll be able to do any clinical work at my current hospital during the fellowship year, and I really don't want to. God knows I'll be working hard enough as a fellow.

But I'll likely continue with some academic development work for my hospital's residency program while I'm a fellow, and I have some other admin duties I'll stay plugged into. They'll still be my collaterals when I return. I'll just plan to do that work while I'm home on the weekends.

I think that meets the letter and spirit of the IRS rule and will stand up to an audit.

I think it's only sketchy for the civilians who are becoming employees of the fellowship institution.

 

[Atlas Shrugged]

No, because USUHS pays for their lodging, travel, and meals (per diem) while away on funded TAD. They have no out-of-pocket expenses to deduct.

FTOS fellows don't get any of that. Just the regular paycheck, and moving expenses to/from. Frequently for one-year fellowships the individuals geo-bach it and leave their families at the current duty station, meaning they end up paying for two households. It's true this is optional, but we do incur large out-of-pocket expenses in the process. It appears the IRS says we can deduct those extra expenses.

During 3rd/4th year there are many unfunded rotations that are out of pocket.

 

[pgg]

That must be new. They paid for me to go everywhere, MS3 and MS4, including 4th year electives.

My MS3 year was mostly away, including 12 glorious weeks at Tripler. I did have to pay $17/night for a townhouse at Hickam AFB family housing while my family was there. Pretty sweet deal.

 

[backrow]

That must be new. They paid for me to go everywhere, MS3 and MS4, including 4th year electives.

My MS3 year was mostly away, including 12 glorious weeks at Tripler. I did have to pay $17/night for a townhouse at Hickam AFB family housing while my family was there. Pretty sweet deal.

For as long as I have known USUHS (>10yrs now) they pay for all required rotations and essentially one away elective 4th year. If you wanted to rotate at more than one place as an audition type rotation 4th year then it's all on the student. (Some of this may have been shifted to 3rd year now with the shift of the curriculum)


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[pgg]

For as long as I have known USUHS (>10yrs now) they pay for all required rotations and essentially one away elective 4th year. If you wanted to rotate at more than one place as an audition type rotation 4th year then it's all on the student. (Some of this may have been shifted to 3rd year now with the shift of the curriculum)

I'm sure you're right. I know I never paid for anything but I'm having a little trouble remembering the details of my MS4 year (01-02). I did a cardiology elective at NMCSD that might have been my only away elective that year. I guess I could go dig up my transcript but it'd probably trigger my PTSD.

Anyway, any USUHS student paying for an away rotation absolutely ought to deduct every bit of every un-reimbursed expense. If they're itemizing deductions on their returns.

 

[Ziehl-Neelsen]

Even though it's PCS and not TDY, I think the fact that my household is staying in our current location, which is where I'll return after fellowship, makes this legit.

So much to my dismay, TurboTax is pretty adamant that the tax code treats PCS orders differently than a civilian who moves somewhere for a period of less than 1 year for work and maintains a separate household. Civilians are allowed to deduct the expenses accrued for this temporary work assignment. For military, the PCS orders define your new place of business and this does not represent a temporary work assignment away from your "normal place of business" where you maintain a separate home for your family.

Well that sucks, I was counting on a 5 figure refund this year with this deduction. Looks like I'll have to make up the difference at the Indian Casino this weekend--hard 8 on the hop pays 30-1!

 

[ActiveDutyNavy]

So much to my dismay, TurboTax is pretty adamant that the tax code treats PCS orders differently than a civilian who moves somewhere for a period of less than 1 year for work and maintains a separate household. Civilians are allowed to deduct the expenses accrued for this temporary work assignment. For military, the PCS orders define your new place of business and this does not represent a temporary work assignment away from your "normal place of business" where you maintain a separate home for your family.

Well that sucks, I was counting on a 5 figure refund this year with this deduction. Looks like I'll have to make up the difference at the Indian Casino this weekend--hard 8 on the hop pays 30-1!

That's the way I've taken it, much to my dismay and personal bias to try to convince myself this deduction is possible. for a one year FTOS we will still receive PCS orders, in that we are paid a BAH which is meant to pay for housing in the area of our "duty station". Which is your placed of fellowship. I want to be wrong..

 

[didja]

Not an accountant but I think you could still do it, you just can't use turbotax or other automated programs. When i installed a charging station for my electric car I couldn't use turbotax even though the charging station credit was legit, the turbotax just couldn't fit it into its algorithm. If there isn't a specific military exclusion listed you should file, you'll just need to do so on paper. Document everything of course in case of audit.

 

[pgg]

I'm claiming the deduction. The Navy sent me on a temporary 1-year assignment away from my normal place of work, I have incurred unreimbursed costs associated with that assignment, and I'm deducting them. If audited, I can prove that I have made dozens of trips back home over the year. I have documented work done on behalf of that specific location. I'm returning and resuming my job at that location exactly 365 days later. I'll win.

Likely a moot point though, as audit risk is low.

 

[ActiveDutyNavy]

I'm claiming the deduction. The Navy sent me on a temporary 1-year assignment away from my normal place of work, I have incurred unreimbursed costs associated with that assignment, and I'm deducting them. If audited, I can prove that I have made dozens of trips back home over the year. I have documented work done on behalf of that specific location. I'm returning and resuming my job at that location exactly 365 days later. I'll win.

Likely a moot point though, as audit risk is low.

In your case, I would agree. You are still working at your previous duty station and you will return to the same duty station. Not all of us can say that, I would guess (I certainly cannot).
I may hold on to a collateral or two so that I can morally tell myself, my deduction claim is legit.

 

[ActiveDutyNavy]

pgg, I wanted to followup with you and see if you ran into any unforeseen difficulties while filing your return. Also, what tax software did you use, if you self-filed?

 

[pgg]

pgg, I wanted to followup with you and see if you ran into any unforeseen difficulties while filing your return. Also, what tax software did you use, if you self-filed?

I filed an extension. Haven't filed my 2016 return yet. With the end of fellowship and other obligations, I just didn't find time to get my taxes done.

I still intend to claim it.