Working as a locum tenens physician offers flexibility and freedom, but it also comes with complex tax responsibilities.
With the IRS updating 1099-K thresholds for 2025, now is the time to understand how these changes may affect how you’re paid and what you may owe.
In this guide, we’ll cover the essential updates around 1099-K forms, how they apply to your locum assignments, and what steps you can take to stay compliant while minimizing your tax burden.
Let’s get started.
What’s Changing with the 1099-K in 2025?
If you’re already familiar with the 1099-NEC form, you know it’s commonly issued to independent contractors, including most self-employed physicians. However, with the IRS placing new emphasis on 1099-K forms, it’s essential to understand the differences.
Form 1099-K tracks payments processed through third-party platforms like PayPal, Venmo, and Stripe. These might apply to you if a staffing agency or client pays you via a digital payment service rather than via direct deposit or check.
Here’s what’s changing:
- As of December 2024, the IRS increased the reporting threshold to $2,500.
- A further drop to $600 is planned for 2026.
If your earnings from a qualifying third-party platform exceed $2,500 in 2025, you’ll receive a 1099-K. For locum tenens physicians who work multiple short-term assignments, this threshold can be met quickly.
What Locum Tenens Physicians Need to Know About 1099-Ks
1099-Ks don’t apply to every assignment, but they’re more common than you might think, especially if you’re using payment platforms for reimbursements or direct payments.
Here’s how to know when this form matters:
- If you’re paid directly by a staffing agency or medical facility, expect a 1099-NEC.
- If you’re paid through a third-party app, and those payments exceed $2,500 in 2025, you’ll receive a 1099-K from that platform.
Tracking your payment sources is critical. Specifically, if your income includes reimbursements for expenses incurred as part of your Locums contract, such as travel and per diem meals. Always clarify how you’ll be paid before starting an assignment. Maintaining accurate records throughout the year can help prevent surprises at tax time and ensure that all income is reported correctly and accounted for.
Tax Compliance Strategies for Independent Physicians
As a 1099 contractor, you’re responsible for both income tax and self-employment tax, which includes:
- 12.4% for Social Security
- 2.9% for Medicare
That’s a combined 15.3% self-employment tax.
To stay compliant and avoid penalties:
- Set aside 25–30% of your income each quarter for taxes.
- Make estimated tax payments to the IRS quarterly.
- Consider setting up a business entity.
- Work with a specialized CPA, like The Doctor’s CPA, to schedule payments, track deductions, and avoid last-minute stress.
Deductions That Can Lower Your Tax Bill
While locum physicians are responsible for complying with required taxes, you also have access to unique deductions that W2 employees don’t.
Here are some of the most common deductions locum tenens physicians can take advantage of:
- Home office: If you use a portion of your home exclusively for business, you can deduct related rent, utilities, insurance, and internet costs.
- Retirement contributions: If you have a SEP IRA, Solo 401(k), or SIMPLE IRA, you can deduct contributions as a business expense.
- Vehicle expenses: For 2025, mileage can be deducted at 70 cents per mile using the standard mileage rate method. You can also use the actual expense method, but you’ll need to calculate mileage, maintenance, gas, and other costs.
- Self-employment tax deductions: While you are responsible for employee and employer payroll taxes, you can deduct 50% of what you owe.
- Ordinary and necessary expenses: Other unreimbursed expenses, as long as they are ordinary and necessary, can be allowable business expenses under your Locums contract, including travel, malpractice insurance, professional dues and subscriptions, scrubs, medical tools and supplies, etc.
Your potential for tax savings is much greater as a 1099 employee than it would be as a W-2 employee. However, keeping detailed records is essential. For example, it will be very difficult to calculate the actual expense method for vehicle deductions without extensive receipts detailing when and how you used your car for work, so be aware of which deduction method you will use upfront.
Why It Pays to Work with a Tax Professional
Understanding IRS requirements is one thing. Applying them accurately is another.
At The Doctor’s CPA, we specialize in supporting locum tenens physicians with:
- Quarterly estimated tax planning
- Bookkeeping tailored to locum income
- Multi-state filing strategies
- Tax-saving strategies and implementation
- Avoiding surprises from IRS form updates and managing IRS correspondence
Our concierge-level service ensures that your taxes are not only filed but also optimized to fit your unique financial path.
Final Thoughts: Take Control of Your 2025 Tax Strategy
IRS rules are constantly evolving, but that doesn’t mean your finances should suffer. By staying informed and working with a partner who understands the locum landscape, you can remain compliant, reduce your tax burden, and retain more of your hard-earned income.
Need help with your 2025 tax strategy? Schedule a consultation with The Doctor’s CPA today, and let’s build a customized plan for your financial success.