Before I started locums, I googled “how to get paid as an independent contractor”.
That search led me to setting up a PLLC, finding a CPA who works with physicians, and learning about a tax strategy that saves me thousands every year.
Most doctors never have this conversation until tax season hits and they owe way more than they expected.
In today’s newsletter:
AI scribes going mainstream
Important differences between 1099 and W2 (and why it matters)
Three practical steps to kickstart your locums journey
Schedule your estimated tax payments
What I’m Reading
Remember the Change Healthcare ransomware attack in 2024? It's still causing financial problems for physicians.
Change Healthcare processes nearly 40% of all healthcare claims in the country. When it went down, practices couldn't submit claims or verify insurance for weeks.
Small independent practices got hit the hardest. Some doctors had to dip into personal savings, home equity loans, and credit cards just to keep their doors open. Two years later, many are still dealing with the financial fallout. Read more on Medscape
AI scribes are going mainstream
About a third of physicians now have access to ambient AI scribe technology, and adoption is growing fast. These tools listen to your patient encounter through your phone or computer mic and generate a SOAP note automatically.
A randomized trial across 14 specialties found that physicians using AI scribes spent less time on documentation and reported lower burnout. Unclear yet if this will change any patient outcomes.
Whether you love it or hate it, this is where clinical documentation is heading. Read more on ABC News
1099 v W2 Tax Differences
If you're employed at a hospital or health system, you're almost certainly a W2 employee. Taxes are withheld automatically from every paycheck. Your employer pays half of your Social Security and Medicare taxes (FICA). You get benefits and likely don’t think about it much.
When you go locums (or start other side gigs), most agencies pay you as a 1099 independent contractor. Your tax structure changes because of this.
Here's what that actually means:
You pay both sides of FICA tax. As a W2 employee, you pay 7.65% and your employer matches it. As a 1099 contractor, you pay the full 15.3% yourself on income up to $184,500 (the 2026 FICA wage base). That's a big number that catches a lot of physicians off guard.
Nobody withholds taxes for you. There's no payroll department taking money out of your check. You get the full amount deposited. It feels great until you realize you owe the IRS a massive payment.
You have to pay quarterly estimated taxes. April 15, June 15, September 15, January 15. Nobody reminds you. Miss a payment or underpay, and you can get hit with penalties.
But the upside is that you can access deductions as a 1099 such as:
CME courses, medical licenses, board certification fees, professional memberships, malpractice insurance, home office expenses, health insurance premiums, travel expenses, per diem on assignments.
The S Corp Move
When I talked to my CPA, he told me to have my PLLC taxed as an S corporation.
As a sole proprietor or single-member LLC, you pay self-employment tax (that 15.3%) on all your net income.
As an S corp, you pay yourself a reasonable salary through W2 payroll. You pay FICA on that salary. But any profit above that salary gets distributed to you without the self-employment tax.
The savings can be significant. We're talking potentially thousands of dollars depending on your 1099 income and how you structure it.
More on the S corp math next week.
Remember: This article is not financial advice, just some strategies that have worked for me. Always talk to a tax professional before making any major financial decisions.
The Practical Win: Estimated Taxes
🚀 Set your quarterly (estimated) tax reminders right now:
Open your calendar and add the IRS dates (see them here). Set a reminder two weeks before each one so you have time to calculate and pay.
If you're new to 1099 income, a safe starting point is to set aside 25-30% of every payment you receive. Put it in a separate savings account and don't touch it until it's time to pay. Overpaying slightly is better than getting hit with an underpayment penalty.
The Locums Corner
Brand new to locums? Here’s a quick 3 point list to get you started on your journey.
Get your licenses in order. Make sure your license is up to date. Also check if your state is part of the IMLC (Interstate Medical Licensure Compact). It now covers over 40 states and makes getting licensed in new states significantly faster. The more states you're licensed in, the more opportunities you can say yes to.
Talk to at least 2-3 agencies. Each agency has different facility relationships, rates, and specialties. The big names (think Weatherby, AMN, etc) have better infrastructure and facilities they have relationships with, but smaller agencies can occasionally get you better rates and more personal attention. Compare before you commit and don’t sign any agreement without reading it first.
Build your credentialing folder. Have a digital folder ready with your CV, medical licenses, DEA, board certification, immunization records, references, and CME log. Every assignment requires credentialing and having your documents ready to send puts you ahead of many applicants.
What’s coming in the next few issues:
Real estate investing - is this really passive?
Building a personal brand as a physician
More detail into specific side hustles
What would you like covered in future issues? Reply to this email and let me know!