Before beginning your locum tenens journey, it’ important to learn how taxes work for independent contractors, also known as 1099 employees. 1099 employees are self-employed and, in the case of locum tenens providers, have a lot more freedom and flexibility when it comes to their work-life balance.
However, there are some differences between full-time W-2 employees and independent contractors especially when it comes to taxes. Below is an introduction to how taxes work for locum tenens providers.
Tax Tips for Independent Contractors
Talk to a Professional
The best thing you can do for your money and your future is to work with someone who has a deep understanding of how taxes for independent contractors work. After all, most employees are W-2 employees, so not all accountants will have a lot of experience with 1099 professionals. You will want to make sure your accountant also has experience with multi-state taxation if you work assignments in various states to ensure they are familiar with different states’ tax codes. Working with a professional is a great way to learn more about the process, or to have them handle a majority of the work when it comes to filing taxes.
Do Your Research
Not only should you work with a professional, but it is also important to do your research and know what works best for you. For example, research different retirement plans and pensions like the Money Purchase Pension Plan, SEPs, and savings. You should also decide if you want to file as an independent contractor, LLC, or S Corporation. The accountant you work with can help guide you in the right direction, but it always helps to get an idea ahead of time for what you want.
Tracking your expenses is extremely important, yet this is where a lot of independent contractors mess up. While it may sound daunting at first, it’s actually pretty simple to keep track of your expenses. You can set up a Google document that you load everything into and can easily edit, or there are apps like Expensify and other systems you can use. You may have to try a couple of different methods to find which works best for you and your organizational style.
Another thing to remember is you should track expenses before, during, and after assignments. It also doesn’t hurt to track expenses in-between assignments as well to make sure you are extra cautious and thorough. You’ll also want to keep a note of things your agency may cover like travel, meals and incidentals, licensure reimbursements, and more.
Whether you plan to do your taxes yourself or will use the help of a professional, keeping track of expenses throughout the process will prevent a lot of stress when it comes to filing taxes.
While planning for locum tenens work may seem like a lot to take in, remember that there are many advantages to working locums assignments such as flexibility, extra income, travel opportunities, and more. Eventually, you’ll get used to how taxes work for independent contractors and it won’t feel so overwhelming.