Qualified travel nurse housing allowances and meal per diems are statutory reimbursements designed to cover duplicate living expenses away from home. Under federal tax law, legitimate accountable plan stipends are exempt from federal income tax and from FICA taxes (Social Security and Medicare).
Yet payroll processing errors at healthcare staffing agencies occur frequently. When payroll software is misconfigured, an agency may withhold 7.65 percent in FICA taxes from your non-taxable stipends, costing you hundreds or thousands of dollars over a 13-week contract.
Spotting FICA errors on your weekly pay stub
To verify that your stipends are properly shielded from FICA taxes, examine the earnings and deductions sections of your weekly pay stub.
Multiply your taxable hourly base wages plus overtime by 0.0765 (6.2 percent for Social Security up to the annual wage cap, plus 1.45 percent for Medicare). The result should match the total FICA deductions on your stub.
If the FICA tax deducted from your paycheck equals 7.65 percent of your total weekly package (taxable wages plus non-taxable stipends), your agency has misclassified your per diems as taxable compensation for payroll purposes.
You can verify proper tax withholding distributions using our Contract Analyzer.
Examining Box 1 vs Box 3 on Form W-2
At year end, examine Form W-2 carefully before filing your taxes.
Box 1 reports your taxable wages subject to federal income tax. Box 3 reports Social Security wages, and Box 5 reports Medicare wages. For a standard travel nurse receiving tax-free stipends, Box 1, Box 3, and Box 5 should generally reflect identical or very similar figures, unless you contributed to a pre-tax retirement plan like a 401(k).
If Box 3 and Box 5 are thousands of dollars higher than Box 1, the agency mistakenly included your non-taxable travel stipends in your FICA wage base.
Refer to official wage definitions in IRS Publication 15 (Circular E).
Step-by-step process to recover overpaid FICA taxes
If you discover that your agency erroneously withheld FICA on tax-free per diems, take immediate action to reclaim your money.
First, notify your agency payroll department in writing, providing copies of your pay stubs and pointing out the calculation discrepancy. Ask the agency to issue a corrected Form W-2c and refund the overwithheld FICA taxes directly to you.
Second, if the agency refuses or fails to correct the error, you can file federal Form 843 (Claim for Refund and Request for Abatement) directly with the IRS, attaching copies of your pay stubs, contracts, and proof of your tax home.
Ensure your tax home documentation meets all federal standards by completing our Tax Home Quiz.
Frequently asked questions
Why would an agency mistakenly withhold FICA on travel stipends?
Clerical errors or misconfigured payroll software can erroneously categorize non-taxable accountable plan reimbursements as taxable FICA wages.
How do I check Box 1 versus Box 3 on my W-2 for FICA errors?
Compare Box 1 (taxable wages) to Box 3 (Social Security wages). If Box 3 is thousands of dollars higher than Box 1, your stipends were likely taxed for FICA.
How do I get a refund for overwithheld FICA taxes from an agency?
Ask your agency for a corrected Form W-2c and direct refund. If they fail to comply, file IRS Form 843 directly with supporting documentation.