Tax Tips for Locum Physicians: Navigating the 1099 Tax Form

As a locum tenens physician, the flexibility to choose assignments, set your schedule, and work in diverse environments are major perks. However, this independence comes with unique challenges, particularly when it comes to taxes. Unlike traditional employees, most locum tenens physicians are classified as independent contractors, meaning they receive a 1099 form instead of a W-2. While this status offers opportunities for tax savings, it also requires some proactive financial planning.

The volume of doctors choosing locum tenens as a work model has increased by 88% since 2015. Today, around 6.4% of doctors currently file as independent contractors. Yet many suggest they are unprepared for the rigors of handling the complexities of 1099 labor.

If you’re navigating the 1099 tax form for the first time or seeking ways to optimize your deductions, these tips will help simplify the process and keep more money in your pocket.

Understand Your 1099 Status

As an independent contractor, your income isn’t subject to withholding for Social Security, Medicare, or federal income taxes. Instead, it’s your responsibility to report all earnings and pay the appropriate taxes. This reality makes the 1099 form a central document when filing your return. Review it carefully to ensure all income from locum tenens assignments are accurately reported.

Plan for Quarterly Estimated Taxes

Since taxes aren’t automatically withheld from your paychecks, the IRS requires independent contractors to pay quarterly estimated taxes. Missing these payments can result in penalties, so plan ahead. Use IRS Form 1040-ES to estimate your tax liability and ensure you set aside enough to cover federal and state taxes.

Maximize Tax Deductions

One of the benefits of being an independent contractor is the ability to claim business-related expenses as deductions. Some common deductions for locum tenens physicians include:

  • Travel costs: Airfare, car rentals, and mileage related to your assignments are deductible.
  • Housing: These costs can often be written off if your assignment requires temporary housing.
  • Professional fees: Licensing, credentialing, and association membership fees.
  • Continuing education: Courses, certifications, and conferences directly related to your field.
  • Home office deduction: If you use part of your home exclusively for administrative work related to your locum tenens role, you may qualify.

Keep detailed records of your expenses and store receipts for easy documentation at the end of the year.

Consider Hiring a Tax Professional

Navigating independent contractor taxes can be overwhelming, especially when juggling multiple assignments. A tax professional experienced in working with physicians can help you uncover additional deductions, stay compliant with IRS regulations, and minimize your overall tax burden.

Leverage Retirement Savings

Independent contractors can establish retirement accounts such as a SEP-IRA or Solo 401(k). These plans allow you to contribute significantly more than traditional IRAs, reducing your taxable income while saving for the future.

Working as a locum tenens physician offers tremendous freedom and career flexibility, it also demands financial discipline. By understanding your tax obligations, maximizing deductions, and staying organized, you can ensure a smoother tax season and keep more of your hard-earned money. When in doubt, consult a tax professional who understands the nuances of 1099 income and the locum tenens lifestyle.

Looking for your next assignment? Consider MedSource Consultants a resource for better connections, work environments, and compensation packages. Talk with our team about your options.