Most locum tenens physicians work as 1099 independent contractors. Here's what that actually means for your taxes, your liability, and how you get paid.
The default: 1099 independent contractor
Most locum tenens staffing agencies — including Falcon Locums — pay physicians as 1099 independent contractors. This means no taxes are withheld from your pay. You receive your full day rate and are responsible for paying federal income tax, self-employment tax (15.3% on net earnings), and any applicable state income taxes on a quarterly estimated basis.
What changes when you're 1099
- You pay both the employee and employer share of Social Security and Medicare (self-employment tax)
- You're responsible for quarterly estimated tax payments — failure to pay quarterly triggers penalties
- You can deduct legitimate business expenses: malpractice insurance, licensing fees, CME, home office, professional memberships, and travel not covered by the agency
Should you form an LLC or S-Corp?
Many locum physicians — especially those earning above $100K/year in locums income — form an LLC taxed as an S-Corp to reduce self-employment tax. The structure allows you to pay yourself a reasonable salary (subject to SE tax) and take the remainder as a distribution (not subject to SE tax). The savings can be significant at higher income levels. This is a decision to make with a CPA who has healthcare and locums experience — not something to DIY.
W-2 employment in locums — when does it happen?
Some staffing agencies employ their physicians as W-2 employees. In this structure, the agency withholds taxes and pays the employer share of FICA. Physicians receive a lower gross rate but have simplified tax obligations. W-2 may also affect your eligibility for certain deductions. Some states (notably California) require W-2 employment for certain provider types.
What Falcon Locums uses
Falcon Locums pays physicians as 1099 independent contractors. Your full day rate is paid weekly via direct deposit. We provide 1099-NEC documentation at year end. We strongly recommend working with a CPA experienced in locum tenens tax structure before your first assignment.
Bottom line
- 1099 is the standard in locums — higher gross pay, more tax responsibility
- Form an LLC/S-Corp if your locums income is significant — talk to a CPA first
- Track your deductible expenses from day one — licensing, CME, and travel add up
This article is for informational purposes only and does not constitute tax or legal advice. Consult a qualified CPA or tax attorney for guidance specific to your situation.