7 Things Locum Tenens Providers Need to Know about 1099s and Filing Taxes as an Independent Contractor
December 14th, 20165 Min read
The New Year will be here before we know it and with it comes tax season. Don’t wait until April 15 to get your taxes in order. Now’s the time to brush up on what to expect when filing taxes as a locum tenens provider.
Locum Tenens Providers Are Independent Contractors
As a locum tenens physician, you are classified as an independent contractor, not an employee. Because of this, you are responsible for making estimated tax payments. That means you won’t see state, federal, Medicare or Social Security taxes taken out of each paycheck during a locum tenens assignment. And instead of the IRS W2 form, you’ll receive the IRS 1099-MISC form for annual income reporting.
RELATED: How Locum Tenens Physicians Get Paid
What You Need to Know About 1099 Tax Forms and Filing Taxes as an Independent Contractor
For those not familiar with the 1099-MISC form, here are answers to some frequently asked questions independent contractors have about these forms.
1. Are there restrictions on travel expenses for independent contractors?
In order to deduct travel costs, independent contractors must maintain a permanent tax home that they pay housing costs for and that they return to periodically. They also cannot work in the same general area 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.
Dr. Beverly Ricker shares how she manages her taxes as an independent contractor.
2. What’s the difference between a 1099 and W2?
Companies provide W2 forms to their employees. These forms show the employee’s taxable income along with how much has been withheld for taxes. On the other hand, 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.
3. When are 1099s distributed?
January 31 is the deadline for companies to deliver 1099 forms declaring the previous year’s compensation to independent contractors.
4. What if I don’t receive a 1099 from a company I worked with?
Credible staffing companies will send out the required tax forms to their locum tenens providers, but oversights can happen or delivery can be delayed. However, it’s still your fiscal responsibility to pay the appropriate taxes, including Federal, State and self-employment (Social Security and Medicare). So, it’s extremely important to keep your own records of your locum tenens earnings. You can use those figures to calculate your taxes.
5. What if there is an error on the 1099 form?
This is another reason why it’s important to be diligent about keeping your own records of your locum tenens earnings. You’ll want to use your earning records and compare them against any tax forms to make sure the numbers match up.
Don’t panic if you notice a discrepancy. Contact the company to request a correction and ask for an updated form.
6. Can I deduct expenses when filing a 1099?
Certain business expenses can be deducted. However, what the IRS considers a business expense from locum tenens work can be a bit murky. You cannot deduct any expense paid by locum tenens companies, such as housing or malpractice premiums. You are also not allowed to write off expenses that you are reimbursed for, including mileage.
However, you may deduct costs that are paid directly out of pocket and not reimbursed by the staffing agency. For example, if your actual expenses are greater than the amount funded by the agency, you may be able to claim a tax deduction for the additional cost you incur. You may also be able to claim a deduction for 50 percent of either your actual meal cost or IRS allowed meal and incidental per diems while traveling on business. Allowable meal per diem rates vary by location and can be found at gsa.gov/portal/category/26429. Remember to keep adequate documentation for all deductions you claim.
Download this PDF to learn more about qualified travel expenses.
7. Do I have to pay estimated taxes?
If you expect to owe more than $1,000 in taxes for the year, you should pay federal estimated taxes on a quarterly basis. This has no effect on what appears on your 1099 form, but it will save you the stress of having to write one big check each April. You may also be required to pay estimated taxes to the state(s) where you live and where you work.
Publication 334 — Tax Guide for Small Businesses (For individuals who use Schedule C)
Publication 463 — Travel, Entertainment, Gift, and Car Expenses
Publication 505 — Tax Withholding and Estimated Tax
Publication 560 — Retirement Plans for Small Business (SEP, SIMPLE, and qualified plans)
Publication 583 — Starting a Business and Keeping Records
Publication 587 — Business Use of Your Home
Publication 1542 — Per Diem Rates (for travel within the continental United States)
Remember, whenever you have questions regarding the IRS or your tax status, always consult with a professional tax advisor.
Disclaimer: The above information has been condensed from various sources generally available to the public that is subject to change, and is general in nature for which the propriety may depend on personal facts and circumstances. Tax information contained in this document is not intended to be used, and cannot be used, by any person as a basis for avoiding tax penalties that may be imposed by the IRS or any state. We recommend each taxpayer seek advice based on their circumstances from an independent tax advisor.