Q: What is wage recharacterization? How does it affect me?
A: Recharacterization in travel healthcare is simply moving money from your taxable hourly wage to your untaxed side of your pay package.
For example, some companies could offer a Physical Therapist/Occupational Therapist $15 per hour (when they should always make above $20 per hour) and the rest of the pay package would be tax free money.
It may not make sense to you right now, but this is dangerous for multiple reasons.
For one, you can get audited. This is a huge red flag to IRS because they know the normal wage for a Physical Therapist/Occupational Therapist is MUCH more than $15 per hour. In the event that you can’t prove you needed every dollar of your tax-free housing or food stipends, you could have to pay back all of the tax free money that you received.
Secondly, if you apply for a house or a car after you are done traveling, you could get turned down for a loan. Banks typically look at your taxable income you have earned over the last 2 years. So, this means they base it on your hourly wage and not the tax free money you receive. For example, if you are trying to by a $400,000 home and seem to only be making $15 per hour, you will be turned down for the loan.
So, how do you stay out of trouble? Pair with a travel company that does things with integrity! Pair with a company that knows the ins-and-outs of travel healthcare taxes. Partner with someone you can trust!
Have more questions about travel? Comment below or message me!