Tax Tips for 1099 Nurse Contractors: In-Depth Guide
Do your taxes like a pro this year. Picking up per diem nursing jobs on the side or even as a full-time job is a great way to earn premium pay. Nurse contractors and other clinicians who pick up PRN jobs are considered self-employed and receive 1099-MISC tax forms at the beginning of the year – not W-2s.
We want our nurses and assistants to be ready and informed. You might be wondering what to do with your 1099-MISC tax forms. Keep reading to know how CNA & nurse contractors can handle their taxes like a pro.
Who is This Guide For?
If you are a certified nursing assistant (CNA), licensed practical nurse (LPN), or a registered nurse (RN) who has worked per diem shifts through NursaTM, or some type of PRN staffing agency that has issued you 1099-MISC forms, then this guide is for you.
You are considered a contract worker for NursaTM, and as such instead of a W-2 that you would or will receive from a regular employer if you worked full-time or part-time, you will receive a 1099-MISC from us.
What is a 1099-MISC?
The 1099 form is the government tax form that we use to report all money we have paid to individual contractors (you). This form is relatively simple when compared to a W-2 for one reason: no taxes have been deducted.
A W-2 form will show that the employer has already deducted Social Security, Medicare, and income taxes. As a 1099 contractor, none of those taxes have been deducted from your income.
What if I Didn’t Receive a 1099-MISC from NursaTM?
If you earned less than $600 dollars in the year 2020 through NursaTM, then you may not receive a 1099 form.
Per the IRS, if you earned $400 or more through self-employment (contract work) you are required by law to report that income, even if you don’t have a 1099 form.
What Taxes Does a 1099 Contractor Have to Pay?
You will be responsible for two types of taxes: Self-employment tax, and income tax (state and local).
The self-employment taxes will cover Social Security and Medicare taxes and are figured as a percentage rate from your net income of contractor work. The Social Security tax is 12.4%, and the Medicare tax is 2.9%.
Income tax rates will vary based on where you live and work. Not all states have income taxes, here’s a list of the few that don’t:
- New Hampshire
- South Dakota
*Keep in mind that while the above-listed states don’t have income taxes, there may still be local taxes you are required to pay.
What Deductions Are CNA, LPN, and RN Contractors Eligible For?
Deductions can be complicated, and rely not only on good documentation but also on the work of a good tax expert (CPA) to determine if you benefit more from a standard deduction or itemized deductions. In order for your CPA to best assess this, your documentation will be key. The following is a list of items that may be eligible for deductions, but you will need receipts.
- Work clothing – uniform, scrubs, and medical shoes
- Work Equipment – stethoscope, scissors, penlight, oximeter, etc.
- Licensing or Certification exam fees, and renewal fees
- Continuing education classes or conferences – potentially meals and travel could be included
- Professional organization membership fees or dues
- Journal or subscription fees for your field
- Health insurance premiums
- Professional liability insurance
- Worker’s compensation insurance
- Transportation costs – mileage, or daily/weekly/monthly public transportation passes
- Student loan interest – up to $2,500 for single filing
Can I Do My Own Taxes as a Contractor?
Yes, you can do your own taxes. However, we strongly recommend you hire a qualified Certified Public Accountant (CPA), preferably one with experience dealing with freelancers or contract workers and their taxes. You might feel the urge to save the money you would spend on hiring a CPA.
But the reality is, that taxes are complicated, even more so if you want to itemize to try and maximize deductions. Doing it yourself could cause you to miss out on a tax credit or deduction that would be to your benefit. Additionally, your status as a contractor might mean that instead of paying your taxes annually, that you need to pay them quarterly instead.
Do I Need to Pay Quarterly Taxes?
The federal government requires some self-employed contractors to pay their taxes quarterly. Why? Often, contractors end up owing at tax time instead of receiving because they (you) are responsible for paying the entirety of the Social Security, income, and Medicare taxes at tax time because it was not withheld from your earnings throughout the year. It may sound like a pain to pay quarterly instead of annually, but it can be a substantial amount of money to pay all at once. Spreading it out over quarterly payments can make it easier on you financially.
If you expect to owe at least $1,000 in taxes from your contractor income, you should pay taxes quarterly. That is a difficult question to answer though, thankfully we found that the IRS put together an online quiz to help you determine if the quarterly tax requirements apply to you. Follow the link to take you to the official IRS page to start their quiz.
What Happens if I Find Out I Should Have Paid Quarterly Taxes Last Year?
If you find that you are required to file taxes quarterly here is the quarterly tax schedule:
|Payment Period||Quarterly Tax Due Date|
|January 1 – March 31||April 15|
|April 1 – May 31||June 15|
|June 1 – August 31||September 15|
|September 1 – December 31||January 15|
*Information from the above table taken directly from the IRS website.
**If the quarterly tax due date falls on a holiday, Saturday, or Sunday then the payment is due the following business day.
Unfortunately, if you take the quiz and find that you are required to pay quarterly taxes but didn’t last year, you may find yourself subject to a penalty. Contact a CPA as soon as possible to start working on your taxes, because penalties are calculated with a complicated formula that includes tracking the number of days between the due date, and your date of payment.
More Information on Quarterly Tax Payment Penalties
To calculate the penalty for not paying quarterly taxes, Form 2210 Underpayment of Estimated Taxes by Individuals, Estates, and Trusts, is required. This is complicated, and best left for your CPA to do. Alternatively, you can also wait to receive a bill from the IRS calculating your penalty owed with a due date.
The penalty for not paying quarterly taxes can be waived in certain circumstances (waiver information taken directly from the IRS):
- If your income is received unevenly during the year,
- If the failure to make estimated payments was caused by a casualty, disaster, or other unusual circumstance and it would be inequitable to impose the penalty
- If you retired (after reaching age 62) or became disabled during the tax year for which estimated payments were required to be made or in the preceding tax year, and the underpayment was due to reasonable cause and not willful neglect
Talk to your CPA to see if any of these circumstances apply to your situation. Moreover, if the amount you owe will cause you difficulty, your CPA may be able to create an installment agreement, or an offer in compromise to settle your tax obligations.
What Is an Installment Agreement?
An installment agreement is basically just a payment plan. Instead of being required to pay the entire amount due all at once, this would allow you to spread it out over a series of payments. A CPA will typically be able to negotiate a better plan of installments than you could for yourself.
What Is an Offer in Compromise?
An offer in compromise is the term for when you negotiate your tax debt to a lower amount than what is owed. This would require proof that you are unable to pay the full amount owed, even if offered an installment agreement. Again, a CPA will be better equipped to craft an offer of compromise that has the most chance of being accepted by the IRS.
Will You Receive a 1099 from Nursa™ This Year?
Did you work any per diem jobs through our PRN nurse app in 2020? If you didn’t, why not? Pick up high-paying PRN nursing shifts at healthcare facilities near you when you download Nursa™ today.