Locum tenens physicians bring essential expertise and flexibility to healthcare systems, but their financial needs often fall through the cracks.
For staffing agencies helping providers transition from W-2 to 1099, understanding and managing their tax responsibilities is a strategic advantage.
Independent contractors (1099 locum tenens providers) face tax challenges that extend far beyond those typically encountered by W-2 employees. From multi-state filings to overlooked deductions, unmanaged tax responsibilities can lead to financial stress and diminished job satisfaction. Offering tax compliance support not only improves provider retention but also strengthens your agency’s competitive edge.
Let’s break down the tax hurdles your providers face and how your agency can offer meaningful, practical solutions.
The Complexity of 1099 Status
Working as an independent contractor offers unmatched flexibility, but also comes with increased financial responsibility.
Unlike W-2 employees, 1099 providers must handle their own self-employment taxes, which include both Social Security and Medicare. These taxes typically total about 15% of earnings and are paid quarterly.
In addition, 1099 professionals must manage:
- Varying state tax obligations
- Tracking deductible expenses
- Retirement planning without employer-sponsored plans
- Health Insurance costs and HSA contributions
Without the proper support, many physicians unintentionally overlook key compliance issues or miss out on potential savings altogether.
Multi-State Tax Compliance Is a Major Pain Point
Locum physicians often work across state lines, making tax compliance particularly tricky. Each state has its own rules, and most providers lack the time and training to keep up.
While some states have reciprocity agreements that streamline the filing process, many do not. In those cases, physicians may be required to file both resident and non-resident returns, even when no additional tax is owed. Missing or mishandling these filings can result in penalties, delays, and even risks to licensure.
Without a system to manage these complexities, physicians may burn out or abandon locum assignments altogether.
Missed Deductions = Missed Income
Sometimes, physicians don’t need to worry about the money they lose due to non-compliance, but rather the money they lose by not fully leveraging potential savings.
As independent contractors, locum tenens physicians have access to more potential tax savings and deductions than W-2 employees. For example, if they use their vehicles for work, they can deduct the mileage accrued driving to and from assignments.
However, travel expenses aren’t the only thing they can deduct. Some lesser-known savings include continuing education, which can be deducted as long as it’s directly related to an assignment, business meals, home office expenses, and increased retirement benefits, to name a few.
Generic tax advice doesn’t cut it. A CPA specializing in physician finances can help providers maximize these savings and retain more of their earnings where they belong.
The Real Impact of Tax Stress on Provider Satisfaction
Tax challenges aren’t just administrative issues. They have real implications for provider well-being. Nearly half of physicians report symptoms of burnout due to long hours and the demands of hospital work. Many turn to locum tenens roles, seeking better compensation and a better work-life balance. In fact, according to CHG Healthcare, 46% of locum physicians choose this path primarily to earn a higher income. However, when tax mistakes result in unexpected bills or missed deductions, those financial advantages can quickly erode.
Worse still, the burden of managing complex tax responsibilities can undermine the flexibility and autonomy that initially attracted them. When providers feel financially unsupported, they’re less likely to renew contracts or recommend your agency to others.
The Role of Staffing Agencies in Provider Support
The satisfaction of locum tenens physicians directly affects your agency’s success. Supporting your providers’ financial wellness helps you:
- Fill roles faster with returning physicians
- Strengthen relationships with healthcare facilities
- Build long-term trust and loyalty among your talent pool
In a competitive market, the agencies that offer more than just contracts will come out ahead.
3 Actionable Solutions for Supporting Provider Tax Health
Your agency doesn’t need to become a financial advisory firm to make a big impact. Here are three practical ways to support your locum providers:
1. Partner with The Doctor’s CPA
A CPA who specializes in locum tenens finances offers targeted expertise that generic tax firms can’t match. From onboarding through active assignments, The Doctor’s CPA helps ensure compliance, reduce audit risk, and maximize deductions.
2. Educate Your Providers
Offering onboarding resources, like tax tip guides or webinars, can empower your physicians with the knowledge they need to stay ahead of tax deadlines and obligations.
Topics to cover:
- How to estimate and pay quarterly taxes
- What qualifies as a deductible business expense
- Filing requirements for multi-state work
3. Provide Access to Helpful Tools
Simple software tools, such as QuickBooks Self-Employed or TurboTax’s 1099 services, can improve accuracy and alleviate the burden of tax preparation. Even providing recommendations demonstrates your agency’s commitment to provider success.
Compliance Drives Retention and Reputation
Helping your providers stay tax-compliant is about preserving the very reasons they chose the locum path in the first place: flexibility, financial opportunity, and professional autonomy.
When agencies support their providers’ financial health, they build lasting trust, increase contract renewals, and gain a competitive edge in recruiting top-tier talent. At The Doctor’s CPA, we work exclusively with physicians, especially locum tenens professionals, to simplify tax compliance, maximize deductions, and reduce financial stress.
Ready to strengthen your agency’s impact and provider retention? Schedule a consultation with The Doctor’s CPA today.