Getting Started as a 1099 Physician, CRNA, PA, NP, Psychologist, or Social Worker
Whether you're new to self-employment or a seasoned veteran, take a look at our beginner and advanced tips for the 1099 physician, advanced practice, psychologist, or social worker provider. We've covered everything from taxes to incorporation, money management to retirement planning. Also, throughout this article, we've provided links to tools and resources that will help you manage your business as a self-employed healthcare provider.
Before you do anything else, meet with your accountant.
The first thing you need to do is meet with an accountant and decide what business structure will be most advantageous for you. If you decide to incorporate, you have various options, which are treated differently for tax purposes. Typically, S-Corporations allow you to shelter some income from self-employment tax (15.3 percent Social Security and Medicare taxes) by taking part of your income as a distribution instead of salary. Given the new 3.8 percent Medicare tax on incomes of $200,000 or higher for single filers ($250,000 for joint filers), this has become an even greater benefit since the law changed in 2013. However, not every self-employed individual will qualify for or even benefit from this type of corporate structure. This is why it is so important for you to meet with your accountant to decide what type of business structure is most advantageous for you.
As part of this initial meeting, you'll need to consider your tax liability exposure and how best to address it. You'll need to consider the tax advantages of one business entity structure versus another. Your accountant can help you with that. You'll need to decide what your retirement savings goals are and what type of business entity will best accommodate those goals. For instance, some self-employed individuals have found that an S-Corporation indirectly put limits on how much they could put away for retirement because of the way their income was reported.
Another thing to discuss with your accountant is whether you plan to work in multiple states or will work in a different state than you live in. He or she will be able to inform you of the tax filing requirements and whether you'll need to pay quarterly estimated taxes to those states. Fortunately, most states will give you credit on your home state income tax for taxes you paid in a state in which you worked and paid taxes, so you're protected from being taxed twice on the same income.
Create a budget for your quarterly tax payments and other expenses.
As a self-employed doctor or advanced practice provider, you will most likely need to make quarterly estimated tax payments, including self-employment tax, federal income tax and state tax. Once you provide your accountant an estimate of your expected income, deductible expenses and tax-advantaged savings plans, he or she will be able to help you budget for your quarterly estimated tax payments. Alternatively, if you set yourself up as a W-2 employee of your own business entity, you are also able to make withholdings from your salary to offset or avoid your estimated payments.
Chris Cosenza, CFP®, Principal at ClearBridge wealth Management in Atlanta, GA, contributed to this article.www.clearbridgewealth.com
Kevin Hedrick, CPA, Tax Partner at Williams, Benator & Libby in Atlanta, GA, contributed to this article. www.wblcpa.com