Taxes on 1099 income.
On 1099 income nothing is withheld. Here's how self-employment tax and estimated payments work.
- On 1099 income, no tax is withheld. You pay it yourself, through estimated payments during the year and your annual return.
- Self-employment tax is 15.3% of net self-employment earnings (12.4% Social Security plus 2.9% Medicare), on top of income tax.
- Estimated payments are made in four installments during the year.
- Whether work is paid on a 1099 or a W-2 depends on the agency or platform and the agreement you sign.
- Working in more than one state can mean filing in more than one state.
1099 vs W-2: what changes
When you're a W-2 employee, your employer withholds federal and state income tax, plus the employee half of Social Security and Medicare (FICA). Your paycheck arrives net of those withholdings.
On 1099 income, no income tax, Social Security, or Medicare is withheld. You pay those yourself, through estimated payments during the year and your annual return.
Locum work is often paid on a 1099, but not always. The classification depends on the agency or platform and the agreement you sign.
Self-employment tax
Self-employment tax is the self-employed version of the Social Security and Medicare tax that an employer and employee split on W-2 wages. With no employer paying half, you pay both halves.
The rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. The Social Security part applies only up to an annual earnings cap that changes each year, and higher earners owe an additional 0.9% Medicare tax. You can deduct the employer-equivalent half of the tax when you figure your income tax.
Estimated tax payments
Because nothing is withheld, the IRS collects during the year through estimated payments, made in four installments on Form 1040-ES. Paying too little during the year can bring an underpayment penalty. States with an income tax run their own version.
How much to pay depends on your expected income for the year, which is a calculation a CPA can do with you.
Deductions and business entities
A self-employed person can deduct business expenses that are ordinary and necessary for the work. Which expenses qualify, and under what conditions, is a question for a CPA.
Some self-employed clinicians work through an LLC, PLLC, or S corporation. Whether an entity fits your situation is a question for a CPA and an attorney.
Multi-state work
If you live in one state and work shifts in another, you may have to file in both. States with an income tax generally tax what a non-resident earns there, and a resident state generally gives a credit for tax paid elsewhere.
A few neighboring states have reciprocity agreements, and the rules differ state by state.
This is not tax advice
This guide explains how tax on 1099 income generally works. It isn't tax advice. A CPA who works with independent contractors can apply it to your situation.
See what each shift pays before you apply.
Create your clinician account. Every listing shows the rate before you apply.
Sign up to see shifts