It’s April so I’ve just got with done with the dreaded chore of doing my taxes and it occurred to me that I’ve never done a post on how a full-timer files his taxes. Since many of us are only drawing Social Security or a Disability check, it’s not an issue; they don’t have to file anything with anybody. But, if you are working on the road, have a business or are drawing a pension from a previous job or have interest or royalty income you are faced with paying both Federal and State taxes (or at least filing a return). Being on the road can make things more complicated so in this post I’ll cover unique things that apply to full-timers paying taxes and I’ll also cover drawing unemployment since many of our jobs are seasonal and we will be laid off and then be eligible for unemployment.
First, I have to throw in a disclaimer that I am no expert in any way on taxes and unemployment, especially Federal taxes (I’ll refer to it as the IRS), I offer you zero assistance on them. But I’ve been doing this for awhile so I do have an understanding of who to pay state taxes to and where and how to draw unemployment, so I’ll offer advice on that. It’s all true based on my experience and to the best of knowledge but it’s worth exactly what you’re paying for it—NOTHING! Maybe I’ve been doing it wrong all these years, who knows! So you’re responsible to do due diligence and verify everything I say here.
Before we start let me clarify income; there are two kinds of income and their type determines where you file it:
- The first is employment income where you have a job, get paid wages and get a W2 at the end of the year. Any income from wages must be reported (file a tax return) to both the IRS and the state you earned it in.
- The other is basically everything else and for those you usually get a 1099 at the end of the year. Non-wage income is only reported to the IRS and to your state of Residence (if they have an income tax).
The fact that you live mobile in a van or RV changes very little about Federal Taxes, you still have to report it just like you did when you lived in a house. But there are two common questions you may have:
1) “What do I use for an address?” Every person in America needs a mailing address and a residential address for myriads of purposes but especially for filing your taxes. The best is to have a trusted family member or friend who will be your address and receive your mail and forward it for you. If you don’t have that, then you need to get a Mail Forwarder who will receive your mail and forward it to you as you travel. I’ve been using my Mail Forwarding address in Nevada when I file with the IRS for the last seven years without any problem.
2) “Can I deduct the interest on my RV from my taxes?” I’m not qualified to answer that but if you go to IRS Publication 936 they do answer it for you: http://www.irs.gov/pub/irs-pdf/p936.pdf. Here is a quote from the Publication:
For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities.”
It’s pretty plain that an RV can be claimed as a home and interest paid on it deducted. From my reading the rules are strict and the facilities must be built in so I doubt most vandwellers could qualify. Again, seek advice from a tax professional in subtle issues of the law like this one.
This is where it gets complicated for many of us. I have friends who work in two or three different states and live in a fourth state; to whom do they file a return and pay taxes? Here it is in a nutshell:
- First, because we are travelers we get to choose the state we call our “Residence” I highly recommend choosing a state with no income taxes; that will make your life much easier and can save you some money. The most common choices are: Florida, Texas, South Dakota, Nevada and Tennessee. If you chose a state with out income tax, that makes April 15th much simpler!
- When you have a job, get paid wages and get a W2 at the end of the year, you only pay income taxes to the state you earned the wages in and not to your state of Residence or any other state. When you get a W2, you only have to report it to the IRS and the state where you earned it.
- For all other kinds of income such as a business, pensions, royalty’s, interest or whatever else, you must report that to both the IRS and your state of Residence if they have an income tax. Which is why I recommend a state where they don’t have an income tax
Let’s take an example of a full-timer friend who lives in her van or RV and became a South Dakota (SD) resident. For income she has:
- A small pension from an old employer and she gets $7,300 a year (she gets a 1099 at the end of the year).
- Worked in the summer as a campground host in California (CA) and made $4,500 dollars.
- Then she worked for Amazon in Kansas (KS) and made $7,700.
- After being laid off from Amazon, she spends her winter drawing unemployment in Arizona (AZ).
As a SD resident she doesn’t have to pay any taxes so she doesn’t file anything with them for her pension and wages are only reported to the state you earn them in. So she does have to file tax forms to both CA (reporting the $4500 she made there) and file a return to KS for the $7700 she made in their state. If she lived in a state with an income tax like AZ she would have to file a tax return for her pension to them. In total she has to file a federal and two state returns—three if she lived in a state with an income tax.
All that starts to get pretty complicated even though her total income for the year was only $19,500. I highly recommend buying TurboTax software. It makes filing your taxes easy and will automatically transfer your Federal information to the state returns and makes getting it all done reasonably painless. Get it from Amazon here: TurboTax Deluxe 2014 Fed & State Tax Software
However, she can also file for unemployment for the winter as long as she was laid off from both jobs, which she was, let’s look at drawing unemployment:
I worked as a campground host for four years and each winter I drew unemployment so I know it can be done and I encourage each of you to do it. Believe me, I’m well aware of what a tangled bureaucratic mess it can be. Trying to get it in CA as a non-resident who had income from others states was a nightmare! But I persevered and finally got it and then from then on it was simple—and profitable! I made $700 a month in unemployment from CA. Here are the facts as I know them about unemployment:
- Unemployment is a Federal program administered by the states. They communicate well with each other and if you worked in multiple states you will only file once and the states will work together behind the scenes to arrive at the amount you’ll be paid.
- If you are laid off from a job (which most of us will be as campground hosts and working for Amazon) you’re eligible to apply for unemployment.
- If you have other income such as a pension, that isn’t factored into your eligibility or amount paid. File even if you have a pension.
- Your state of Residence doesn’t matter, nor does the state where you are at when you file. I’m a Nevada resident but I’ve worked and filed in both Colorado and in California and it wasn’t an issue. Nor does it matter where you are when you file. I filed for Colorado unemployment from Florida where I was visiting my mom and I’ve filed for California unemployment when I was in Nevada one year and in Arizona another.
- There are hoops you have to jump to keep your unemployment coming in and they vary by the state. In Florida all I had to do was register online with their unemployment office and fill in an online Colorado form verifying I was not working and I was looking for work. In Nevada I had to take a half day class in how to find a job. It was a surprisingly good class and I left certain that if I wanted a job they could get me one. Of course I didn’t want a job. You just go through the motions and fill out the forms, no big deal.
Here is a quote from a page I found that did a great job of describing how to get unemployment if you work in multiple states http://www.ehw.com/info_8473839_multistate-unemployment-rules.html
Multi-State Unemployment: Workers move from state to state all the time. With the rise of telecommuting work, it’s also more common for workers to live in one state but work in another. Multi-state unemployment is a situation where you worked in more than one state during your base period, which is the first four of the last five full calendar quarters before you filed for benefits.
Agent State: In a multi-state unemployment claim, the state you currently live in is the agent state. The agent state is the one that manages your unemployment claim. You apply to that state for benefits, explaining that your 15 to 18 months of previous wages were in other states. Once the agent state hears back from those states, verifying your eligibility and compensation amounts, it distributes your payments. It also handles the weekly claims certifications and verifies your job search requirements.
So there you have the basics of paying taxes and drawing unemployment on the road. Let me say again that I am just a layman and not an expert in any way, all of this is just my understanding of how it works. Do your own research and get TurboTax to file your return.