As the calendar year draws to a close, travel nurses have a prime opportunity to review their multi-agency earnings, adjust tax withholding, and implement tax reduction strategies before December 31.
Because travel nurses frequently change employers throughout the year, year-end tax planning is essential to prevent surprise balances and underpayment penalties in the spring.
Audit your cumulative W-2 earnings across all agencies
If you worked for two or three different staffing agencies during the year, your cumulative taxable earnings may place you in a higher marginal tax bracket than any single agency payroll system accounted for.
Each agency payroll department calculates withholding based solely on the wages they paid you, assuming they are your only employer. When you combine wages from multiple agencies, your total income might cross into the 22, 24, or 32 percent federal tax brackets, resulting in underwithholding.
Collect your most recent pay stubs from each agency and run your combined earnings through our Contract Analyzer to project your total federal and state liabilities.
Maximize pre-tax retirement accounts before December 31
One of the most effective ways to lower your taxable income at year end is to increase contributions to employer-sponsored retirement plans.
If your current staffing agency offers a 401(k) or 403(b), you can increase your elective deferral percentage for your remaining November and December paychecks up to the annual federal statutory ceiling. Every dollar contributed reduces your Box 1 taxable wages on Form W-2.
If you worked as a 1099 independent contractor nurse during the year, you have until the tax filing deadline to fund a SEP IRA or Solo 401(k).
Review contribution limits and deadlines directly on the IRS Retirement Plans page.
Fund your Health Savings Account (HSA)
If you were covered by a qualifying High Deductible Health Plan (HDHP) during the year, ensure you maximize your HSA contributions.
Unlike 401(k) contributions, which must be made through payroll by December 31, you can make direct HSA contributions for the current tax year up until the April tax filing deadline. HSA contributions provide an above-the-line deduction that lowers your adjusted gross income dollar for dollar.
Confirm that your primary residence records and tax home substantiation are organized before the year closes using our Tax Home Quiz.
Frequently asked questions
Why do travel nurses often owe taxes when working for multiple agencies?
Each agency payroll system calculates withholding assuming they are your sole employer. Combined wages push your top dollars into higher tax brackets.
When is the deadline to maximize 401(k) and HSA contributions?
Elective 401(k) payroll contributions must be completed by December 31. HSA contributions for the tax year can be made until the April tax filing deadline.
How can travel nurses adjust W-4 withholding before year end?
Submit updated W-4 forms to your current agency requesting extra dollar withholding, or make a fourth-quarter estimated tax payment directly to the IRS.