Locum Tenens Physicians

As a locum tenens physician, you typically work as an independent contractor through an intermediary agency that helps connect you with healthcare facilities as well as provide housing and other benefits. The locum tenens form of employment is expanding due to the economic pressures of reimbursement forcing seasonal staffing as well as skilled-staff shortages across the country.

There are many advantages to working locum tenens. Compensation is better than staff positions, and most employers provide financial assistance with travel expenses as well as living expenses while on assignment. The varied professional experience in multiple facilities is excellent for career advancement. You can sample many of the most desirable regions and climates in the country – expenses paid.

However, working locum tenens creates an unusual and possibly costly tax situation . As an independent contractor, you receive your entire compensation with no taxes withheld. At the end of the year, you receive a form 1099-M instead of a W-2, which is also reported to the IRS, and fully taxable. The income is subject to federal income tax, as well as state income tax to the states where you work (unless you worked in a no-tax state such as Alaska , Florida , Texas , or Nevada ). In addition, you are also subject to Social Security and Medicare taxes in the form of “Self-employment tax”, reported on your form 1040. As a normal W-2 wage employee, employers are required to pay half of the Social Security/Medicare (FICA) taxes for their employees. However, as an independent contractor, you are responsible for paying the entire tax liability, which is about 15%; on top of federal income taxes. You are also required to pay quarterly tax estimates, or face penalties. Just to add insult to injury, if you maintain a permanent home (“tax home” in tax jargon), and qualify for tax-free housing benefits, then you are also subject to tax on your entire income back to your home state.

On the positive side, we specialize in the unique tax situation faced by locum tenens, including temporary living and travel expenses, self-employment 1040's, and multiple-state returns. From a tax standpoint, there are some off-setting benefits to being an independent contractor. The most significant is the ability to deduct most expenses “first dollar”. With a few exceptions, there are no “threshold” amounts to exceed before deducting, as there are for W-2 wage employees. For single wage-earners, this includes the standard deduction ($4,850 for 2004) and the 2% of AGI threshold for “un-reimbursed employee expenses” on the “long form” Schedule A. On the 1040 Schedule C for self-employed independent contractors, expense deductions start reducing income from the first dollar spent. In addition, there are few artificial restrictions such as the inability for wage-earners to deduct computer expenses, “in spite of legitimate business use”. Also, the Social Security portion of the self-employment tax has an income limit ($90,000 for 2005). States also have provisions for an “Other state tax credit” to avoid double state taxation to your home state.

Generally, the best tax breaks for locum tenens accrue to those who work temporarily away from a permanent home (“tax home”). Temporary living expenses (lodging and meals) and travel expenses can be either deducted from your income on your tax return, or reimbursed dollar-for-dollar tax free, or provided by your agency tax free.

Give us a call to see if you qualify for tax-free benefits .

Click here for our contact information.

Back to main site