Spotlight on Licensing and Tax Laws: California
June 23, 2010 - One of the interesting things about the life of a traveler is that we often accumulate state practice licenses that we may or may not actually use. In some cases we will obtain a license simply to be available to work in a specific location.
In the past most state professional practice boards kept license information for use within their own department and did not share their information with other government agencies. For example, state nursing boards were not necessarily interested in whether a nurse owed child support, as much as they were interested in whether the nurse had a criminal conviction. On application, the nursing board would run an interagency search on the records of an applicant to obtain any criminal information.
Income tax information has always taken a back seat in this process, but this is changing, especially in California. The tax office of California (California Franchise Tax Board) cross references active professional practice licenses for nursing and virtually every trade that requires a license. With this information in hand, the Franchise Tax Board then matches state tax returns with the license database. If a return has not been filed, a notice will be sent to the individual requesting a tax return even if they did not work in the state the year in question. The filing of a tax return is now part of the requirements for the privilege of holding a California nursing license.
Starting with the 2010 tax return, we are strongly suggesting that all of our clients who hold a California practice license file a California state tax return even if no income was earned in the state for the year. Filing a “zero” return will avert an investigation and should be considered a part of the annual process of maintaining a California license even in years in which no work was performed in the state.
While California is the most aggressive state in this regard, other states are actively cross referencing this information and will so even more in the future. For those with compact licenses, this will become a very important item to consider each tax season.
About the author:
Joseph Smith is an IRS Enrolled Agent and former travel respiratory therapist whose firm (TravelTax LLC) provides tax preparation and audit representation for the mobile professional. He is a regular contributor to HealthcareTraveler, Locum Life and a speaker at the annual Travel Medical Professionals Convention. For more travel nursing tax advice, visit TravelTax.com.
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