A strong year working locum tenens assignments offers meaningful earning potential, but it can also bring an unwelcome surprise if you’re not planning ahead for taxes.
Unlike W-2 employees, locum tenens physicians earning 1099 income typically don’t have taxes withheld from each paycheck. As a result, you’re responsible for setting aside funds and submitting estimated quarterly tax payments to the IRS throughout the year.
For many clinicians, the first surprise isn’t federal income tax alone, but the combined weight of income tax, self-employment tax, and, in some cases, multi-state tax obligations. The second is timing. Waiting until tax season to pay can result in penalties, even if you ultimately pay the full amount.
The good news is that quarterly taxes become far more manageable once you understand how they work. In this guide, we walk through how estimated quarterly tax payments function, how to calculate them for 2026, and how to avoid common mistakes that can disrupt cash flow.
Why Locum Physicians Must Pay Quarterly Taxes
Most locum tenens physicians are paid as independent contractors rather than employees. If you receive 1099 physician income, no employer is withholding federal income tax, Social Security, or Medicare from your payments as they would if you were a W-2 employee.
Instead of having taxes taken out automatically, you generally make payments yourself using IRS Form 1040-ES. These estimated payments help cover:
- Federal income tax
- State income tax, if applicable
- Self-employment tax
This is a key distinction between W-2 and 1099 physician taxes. W-2 employees have taxes withheld from each paycheck, while locum physicians must plan proactively and meet quarterly deadlines.
What Taxes Are Included in Quarterly Payments?
When calculating quarterly tax deadlines for physicians, it helps to know what you’re actually paying.
Federal Income Tax
This depends on your total taxable income, filing status, deductions, and credits. For most locum physicians, this will make up the largest portion of what you set aside each quarter.
The US uses a progressive tax system, meaning your income is taxed at different rates as it increases and moves into higher brackets. Entering a new tax bracket does not mean all of your income is taxed at that higher rate. Only the portion of income above each threshold is taxed at the higher rate.
For W-2 employees, tax withholding is adjusted automatically throughout the year. As a locum physician earning 1099 income, you will need to monitor your income and estimate your tax bracket as the year progresses to ensure your quarterly payments are accurate.
Self-Employment Tax
Self-employment tax locum doctors owe is often the most overlooked piece. For 2026 planning purposes, many physicians should expect to account for the standard 15.3% self-employment tax rate on applicable earnings. This covers:
- 12.4% for Social Security
- 2.9% for Medicare
If this is your first full year as a 1099 contractor, this extra layer can make your tax bill much higher than expected.
State Taxes
If you complete assignments in multiple states, you may have filing obligations in more than one jurisdiction. This adds complexity and makes organized recordkeeping essential.
In general, you pay state income tax where the work is performed. Your home state may also tax the income, but most states offer a credit for taxes paid to other states.
A Simple Example
Suppose a locum physician expects to earn $300,000 in net 1099 income in 2026 and works in a state with a 5% income tax rate.
Here is how the total tax picture might break down:
- Federal income tax: Approximately $60,000 to $75,000, depending on deductions and filing status
- Self-employment tax: About $45,900 (15.3% of $300,000)
- State income tax: Around $15,000 (5% of $300,000)
This brings the estimated total tax liability to roughly $120,000 to $135,000, or about 40% to 45% of income. Divided into quarterly payments, that would mean setting aside approximately $30,000 to $33,750 per quarter.
2026 Quarterly Tax Deadlines Physicians Should Know
The IRS estimated tax payment schedule for 2026 generally follows these deadlines:
- April 15, 2026
- June 15, 2026
- September 15, 2026
- January 15, 2027
Missing a payment or sending too little can trigger underpayment penalties. A common misconception is that paying in full when filing your return avoids penalties. In most cases, it does not. The IRS expects taxes to be paid as income is earned. To stay compliant, schedule these deadlines in advance and consider setting automated reminders or payments.
How To Calculate Quarterly Tax Payments for 2026
Estimating your quarterly payments can be broken into four practical steps.
Step 1: Estimate Your Total Annual Income
Start by projecting your expected 1099 income for the year. This can be challenging for locum physicians, as income often varies by assignment, specialty, and schedule.
To improve accuracy, review:
- Signed contracts and expected assignment dates
- Historical earnings from prior locum work
- Planned time off
- Anticipated changes in rates or workload
If you work in multiple states, track where income is earned, as this affects state tax obligations. Also, it is generally better to slightly overestimate than underestimate. Falling short can lead to cash flow issues and penalties later in the year.
Step 2: Estimate Your Total Tax Liability
Next, estimate what percentage of that income you may owe in combined taxes. A common rule of thumb for estimated quarterly tax payments physicians make is to save about 30% to 40% of net income. Where you land in that range depends on several factors, including:
- Your filing status
- Your household income
- State tax rates
- Business deductions
- Retirement contributions
- Whether you have other income sources
For example, if you estimate $250,000 in net income and plan around a 34% total tax rate, your projected annual tax would be about $85,000.
This is also where deductions play an important role. Travel expenses, licensing fees, CME, and other qualified business expenses can reduce taxable income. For more details, see our locum tenens tax deductions guide (not yet released).
For more details, see our locum tenens tax deductions guide.
Step 3: Divide the Total Into Quarterly Payments
Once you estimate your annual tax liability, divide it into four payments. Using the $85,000 example, this equals $21,250 per quarter.
However, income is not always consistent. If your earnings fluctuate throughout the year, you may need to adjust payments based on actual income.
This is also where the IRS safe harbor rule can help. This rule states that you can avoid underpayment penalties as long as you pay 100% of last year’s tax liability, or 110% for high-income earners. Since the threshold for high-income earners is $150,000, nearly all locum tenens physicians will qualify and need to pay 110% to qualify. This rule can be especially useful during a growth year when your locum income jumps unexpectedly.
Step 4: Use IRS Tools and Track Every Payment
IRS Form 1040-ES provides worksheets to help calculate your payments. The IRS also offers electronic payment options for convenience.
Keep detailed records of:
- Payment dates
- Payment amounts
- Confirmation numbers
- Tax year applied
Accurate tracking simplifies tax filing and allows you to adjust payments as your income changes.
Common Mistakes Locum Physicians Make
Underestimating Taxes
Transitioning from W-2 to 1099 income often leads to underestimating total tax liability, especially self-employment tax. This can result in a significant balance due at filing.
Skipping or Underpaying Quarterly Payments
Some physicians plan to pay everything at year-end. Unfortunately, this approach often leads to penalties. Consistent, timely payments are essential.
Poor Recordkeeping
Managing income from multiple assignments and tracking expenses across categories can become overwhelming. Without organized records, physicians may miss deductions or miscalculate payments. Maintaining a separate business account can improve accuracy and visibility.
Strategies To Reduce and Optimize Quarterly Payments
Maximize Deductions
Locum physicians often miss valuable deductions simply because they’re not organized. Depending on your facts and filing setup, common deductions may include:
- Travel related to assignments
- CME expenses
- State licensing and credentialing fees
- Professional insurance
- Home office expenses, when qualified
These deductions reduce taxable income and lower quarterly payment amounts.
Use Retirement Contributions
Retirement planning can also support tax efficiency. Options may include:
- Solo 401(k)
- SEP-IRA
- Cash-balance plans
Contributing during the tax year, rather than waiting until filing, can improve both tax outcomes and cash flow.
View our full guide on retirement planning for locum tenens physicians.
Consider Entity Structure
For physicians with stable, higher incomes, forming an LLC and electing to file as an S corporation can potentially reduce self-employment tax liability. Under this structure, you can split your income between a “reasonable salary” (as per IRS guidelines) and distributions. Notably, distributions are exempt from self-employment taxes.
However, this structure introduces additional compliance requirements and isn’t suitable for every situation. The right decision depends on income level, administrative capacity, and long-term financial goals.
When to Work With a CPA and Why It Matters
Quarterly taxes are manageable, but they’re not always straightforward. This is especially true if you:
- Work in multiple states
- Have fluctuating income
- Recently transitioned to 1099
- Need help identifying deductions
- Are evaluating retirement or entity strategies
A CPA with experience in physician finances can assist with projections, compliance, and ongoing adjustments. More importantly, they can help you make proactive decisions that reduce tax liability and avoid costly mistakes.
Take Control of Your 2026 Tax Plan
Quarterly taxes are a core part of financial management for locum physicians. When you understand how estimated payments work and adjust your strategy throughout the year, you gain greater control over cash flow and reduce uncertainty.
The goal is not only to avoid penalties. It is to create a system that supports long-term financial stability.
If you want help calculating your 2026 quarterly tax payments or building a more efficient tax strategy, schedule a consultation with The Doctor’s CPA. Our team helps locum physicians stay compliant, plan effectively, and keep more of what they earn.