February is nearly over, which means that both Spring and Tax Time are just around the corner. While all Americans face the IRS deadline of April 15th, for full time RVers filing income tax returns comes with special considerations that affect how – and where – they file. It’s never too early to begin preparing to file your return, so here are a few things to keep in mind as you gather your thoughts and your documentation:
Where Do You Live?
While the federal government doesn’t care where your permanent residence is, certain states do. Every state publishes a tax guide, which you can usually find linked on the state government website. Whatever state you consider to be home, however, you’ll need to address the following:
Do you have clear-cut permanent residence, or just a mail forwarding address?
Did you earn a significant amount of income in your “home” state, or in another?
Are you registered to vote? If so, where? Generally this determines your state of residency.
These issues are important, because without an absolute address, you might find that you are liable for taxes in more than one state. As an example, Ohio’s tax law says that if you have 120 contacts there in a single year, you owe Ohio taxes. (A contact is defined as passing through to go elsewhere, visiting friends, or having mail sent to an Ohio address.) California, on the other hand, considers you a resident (for tax purposes) if you have gainful employment there for ten days out of a single year. California is also particularly aggressive about tracking down people with trade licenses – if you hold a real estate license in that state, you may find yourself being asked why you didn’t pay state taxes, or slapped with an estimate of what they think you owe, even if you’ve haven’t worked there in over a year.
How Do You Earn a Living?
While many full time RVers are retirees with pensions and cheap car insurance, others have day jobs they can do from the road, and are often self-employed. Every scenario carries with it different tax complications:
Pension income: Depending on where your home state is, and what sort of pension income you have, this may or may not be taxable. Generally pension income follows you wherever you go.
Self-employment. Whether you’re a freelancer, doing manual work or freelance writing, or an independent contractor, documentation is going to be your friend. Be certain to keep records of supplies, postage costs, cell phone and internet usage – all of these may be deductible. As well, be certain that if your income is great enough, you are making quarterly payments.
W-2’d employees: Be certain that you document un-reimbursed business expenses, but as well, if you work for RV camps in exchange for a stipend plus free nights or free meals, be aware that those are not gifts, but part of your income. You have to claim them as such.
Do You Own a Home?
If you still own a physical residence in your home state, you may be able to treat your RV as a second home, and claim interest on any financing, and some repairs, as deductions.
Documentation is Crucial.
Being a full time RVer is no excuse for not keeping records. Tax records, including previous years’ returns should be kept for at least three years. If you buy or sell real estate, especially if it was or is your primary residence, you may need to keep those documents even longer. If space is at a premium, you can scan paperwork and keep it in a digital format for easy access.
Documenting everything will save you should something happen.
If the Worst Happens…
If you do get receive notification from the IRS or a state taxing authority that says you owe money, you should respond immediately, because interest on unpaid or underpaid taxes compounds from the date of the first notification. If you’re a fulltime RVer and your mail goes through a forwarding service, it may be ten days or longer before you even receive that first notice.
When you do respond, be prepared for the fact that the average government employee is unlikely to understand the concept of living in an RV full-time. Be professional, polite, and cooperative, and then bring up the fact that you live in a home that has tires. If you don’t receive a response within ninety days, be sure to follow up, in case mail is misdirected, and keep copies of everything.
You Must Pay What You Think You Owe.
One other important thing to remember about taxes is that even if you are filing a request for an extension, you must pay what you think you owe. If it turns out that you overpaid, you will be reimbursed.
Filing taxes from the road need not be a frightening event, but having the right documentation, and being aware of the rules for your home state will help you file accurately, and on time.
Of course, if you have any questions, you should always consult a tax advisor directly.