<%@LANGUAGE="JAVASCRIPT" CODEPAGE="65001"%> Tax Considerations for RVers
NOTE: While this is designated as an ARCHIVE FILE, it is retained despite the date of first publication because it offers information of continuing current interest and/or for its historical perspective. Please be guided accordingly.



TOPIC: Tax Issues for RVers

INSTRUCTORS: Jerry & Maryanne Stevens

(Both instructors are former IRS employees)

[Ed Note 10/2011] This class was first given more than 10 years ago. However, the considerations that are discussed below are most germane today. Only your accountant or attorney can provide tax guidance to your personal circumstances.]

Taxpayer Responsibilities: Every RVer needs to know the burden for compliance rests with him or her -- not the tax preparer; not the author of "how to" books; IRS employees -- just the RVer. So unless you're educated about tax issues, you're inviting a very unhappy surprise --- and usually a costly one as well. This course is not intended to answer questions that depend on the detailed personal circumstances of individual RVers, but rather to point out the the issues which are often faced by RVers, both with respect to federal income taxes, and with respect to state taxes. All RVers have similar issues pertaining to federal income taxes. Full time RVers often have unique and complex issues pertaining to state taxation. The federal government doesn't care in the least what state you "live in" -- they get their money regardless of your legal residence. But each state wants to extract as much revenue as it can from those who qualify as having a tax residence in their state. These issues can be anywhere from difficult to extraordinarily complex, and vary from state to state.

The instructors compiled a detailed comparison of state filing features from virtually every state. They then rated the state income tax in terms of its relative complexity. RVers without a clear full time residence may find that they have a legal tax liability in more than one state. For example, California's tax provisions say that if you're gainfully employed in that state for 10 days you're a "resident" for state tax purposes. New Hampshire's requirements are so aggressive that the instructors notes indicate simply that unless you have an established tax residence "stay out of this state". If you travel to Ohio to get from point A to point B, you have (for purposes of Ohio's determination of your tax home one "contact". If you visit friends there, you will accrue more "contacts". If you have mail forwarded there (FMCA in Ohio?), you may have many more "contacts". Ohio says if you aggregate 120 "contacts" a year, you owe Ohio state tax! Ohio has the presumption of correctness. Ohio is another example of an extremely aggressive state in terms of asserting tax liability against those who may have thought they were only casual visitors.

Most states have a "Tax Guide". Trailer Life publishes a list of "State Residency Requirements". It doesn't provide all the answers, but it does point to where to go to get an answer. The key, of course is to understand what your own personal requirements are; and be sure to register in a state which is friendly to your situation. Gaylord Maxwell's book on Full timing gives some information on this subject. Full-Timing (the Moeller book) is probably the best available source.

What states do you go to? Pension income is an example of an income source that "travels with you." Your personal "facts and circumstances" are crucial. Where do you do your banking? Where do you vote? Where do you register your vehicles? Where do you insure them? Where do you spend your time? Where do your kids live? Where do you go to church? Where is your doctor, dentist? The more of these in one place, the more likely it is your "tax home".

Tax records are indispensable, and RVers must be responsible for retaining them. Keep records. Being "on the road" is not an excuse for not having records. The record keeping liability for full timers is the same as anyone else. So just accept the fact, and make your plans accordingly.

If you do get a notice from the taxing authorities indicating a deficiency, respond quickly, because interest on any underpaid amounts accrues and compounds from date of first letter. Make that immediately. If you're "on the road", by the time the letter reaches you, the usual 10 day response time has probably already expired. You can't beat City Hall, and this goes even more for the state or federal tax person. Be friendly, prompt, and above all else explain your lifestyle. They simply won't understand "full timing". Lead gradually up to the fact that your home has a steering wheel.

If you don't get a response in 12 weeks, send a followup. Keep copies of everything. Same for when you file returns. Be certain to sign all returns (they're not filed 'til signed); and keep copy of all attachments.

How many years do you have to save tax returns? Minimum of 3 years. But if you buy or sell a house, the record keeping responsibility literally goes to forever -- at least with respect to the cost basis for all houses. If you don't have cost basis information, do what you can to go back and get it. This is because one can ordinarily roll forward the gain on the sale of a residence if it is fully reinvested in another residence within the prescribed time. Thus the gain that you have "deferred" will follow your home sales and purchases -- and you will always have the obligation to substantiate the cost basis on all sales which resulted in a deferred tax gain.

Note that income is not just salary. If you're getting a free RV space in exchange for helping out, you're getting income which is taxable. Depending on the going rate, you may be getting the value of $20/night for helping out. If you do this for 10 nights, you have income of $200. But there is some rare good news in conjunction with this situation, which is not uncommon for RVers: Sec 119 provides if you're required as a condition of your employment to stay;y at the premises, the value of the lodging which you receive qualifies as "excludable income" -- meaning you don't need to report it on your tax return.

BUT (now hear this!) you must document what you did and the value of nights lodging you received. You must of course report the amount of any salary you received. But it will be your responsibility to demonstrate, if challenged, what the value of the excluded income was. A good technique is to document the "going rate", plus the fact you were required as a condition of your employment to be there. It's a good idea to have the Park manager sign your documentation. Keep the name of the manager, the phone number, dates, etc. Even keep a brochure which lists their rates. What's excludable is employer furnished meals and lodging. The W-2 filed by the RV Park for your services at so many dollars per hour, while employed at an RV park, can trigger an IRS inquiry to the value of the meals and lodging you received as part of that engagement. That's why you'll need to have the documentation -- in case you're challenged.

The Davis case (US Sup Court) held that California can't tax pension benefits once the pensioner establishes a new residence elsewhere. The position taken by California was that since the pension was "earned" in California, the payments eventually made pursuant to it were taxable by California irrespective of where the pensioner then lived. Fortunately the Supreme Court ruled that pension payments were taxable only when received, and only in the tax domicile of the pensioner.

Note: Federal legislation is currently being discussed [since passed] which will change landscape for sale of residence. For those over 32 there will be a $500,000 exclusion for gain on the sale of a residence. This may have a positive impact on the extremely difficult record keeping requirement that has been effect until now.

[Our Observations: While federal taxation does not seem to raise many issues which are unique to RVers, state tax laws raise a number of serious questions which need to be understood by those who do not clearly have a "house" and a clearly established tax residence. Full timers must pay very close attention to these issues, and must make an informed choice about which state they want to establish as their "tax home"; and they must follow up with tangible actions which are sufficient to support their claim to having that state as their tax home. We think many full timers would be wise to seek the advice of persons competent to counsel them on this topic -- though we quickly point out that these issues, raised by the trend toward more full timing lifestyles, are not well understood by many.]