Even though it’s not quite tax season yet, April 15 will be here before you know it. So now’s the perfect time to brush up on what to expect when filing taxes as a locum tenens professional.
First, you need to know that locum tenens physicians are classified as independent contractors, not employees. Therefore, you won’t see state, federal, or Social Security taxes taken out of each paycheck during a locum tenens job.
That’s also why you’ll receive the IRS form 1099-MISC for annual income reporting instead of IRS W2 form employees attach to their state and federal returns.
If you’ve never dealt with this IRS form, read on for answers to some of the most frequently asked questions about working as an independent contractor.
Who is an independent contractor?
In addition to not being an employee of a facility or staffing company, an independent contractor must maintain a permanent home they return to between assignments and pay housing costs for. Another restriction is that you cannot be at one contract for more than one year without a substantial break.
Check with a tax specialist as to what defines a “substantial break,” but generally, it should be longer than just a few weeks.
What’s the difference between a 1099 and W2?
Companies that pay more than $600 in a 12-month period to a non-employee for services provided must supply that person and the IRS a 1099-MISC form listing the total gross compensation. A W2 form for an employee shows the net income and how many withholdings have been subtracted for taxes.
When are 1099s distributed?
January 31 is the deadline for companies to deliver 1099 forms declaring the previous year’s compensation to independent contractors. You should receive a 1099 form from your staffing agency for 2016 locum tenens income no later than January 31, 2017.
What if there is an error on the form?
It’s always important to keep your own earning records and compare them against any tax forms to make sure the numbers match up. If you notice a discrepancy, don’t panic. Companies have another month to submit an identical 1099-MISC to the IRS.
This means you have 30 days to contact the company to request a correction and ask for an updated form.
What if I don’t receive a 1099 from a company I worked with?
This is another reason why it’s important to keep your own accounting of locum tenens earnings. Credible staffing companies will send out the necessary tax forms to their physicians; however, oversights can happen or delivery can be delayed. Regardless, it’s still your fiscal responsibility to pay the appropriate taxes, including Social Security and self-employment.
Use your own figures to calculate the taxes.
Can I deduct expenses when filing a 1099?
Yes, you can deduct certain business expenses; however, what’s defined as a business expense from locum tenens work can be a little murky. You cannot deduct any expense paid by locum tenens companies, such as housing or malpractice premiums. Nor are you allowed to write off expenses for which you are reimbursed, including mileage.
You may deduct costs that are paid directly out of pocket and not reimbursed. For example, if you pay for meals while on assignment, but do not submit the receipt to be reimbursed, you may claim a portion of that cost as a business deduction.
Do I have to pay estimated taxes?
If you expect to owe more than $1,000 in taxes for the year, then yes, you should be paying estimated taxes on a quarterly basis. This has no effect on what appears on your 1099 form, but it will prevent the sticker shock of writing out one huge check each April.
Check out our blog 5 Budgeting Tips for Locum Tenens Providers for advice on how to track locum tenens income throughout the year.
And of course, whenever you have questions regarding the IRS or your tax status, always consult with a tax specialist.
