It's that time of year, folks. Again. It's tax time, and nurses pay taxes like everyone else! You've probably already started getting tax documents in your mailbox amidst the junk mail and bills or electronically. Hopefully, you've been collecting your documents in one place. If not, now is an excellent time to start. If this is your first time with earnings as a PRN gig nurse, this year will be different for you. The federal due date for filing this year is April 18th, 2023.
Working PRN through Nursa is different because you are considered a contract employee and also referred to as a gig worker, freelancer, self-employed, etc. Regardless of your choice of title or phrase, this type of work has different tax implications, namely the Self-Employment Tax and income tax. Don't worry; we will explain those taxes and how they apply to you.
Taxes for PRN Nurses
First, let's clear one thing up immediately. Whether you worked many PRN shifts or only one PRN shift in 2022, those earnings must be claimed on your taxes by federal law. Any contracted work equivalent to more than $400 for the entire year is taxable. Most PRN nurses earn more than that in one shift, and CNAs can earn more than that in only two changes, so it's safe to say that you qualify.
Unlike staff employees who typically receive a W-2 come tax time every year, contract employees receive a different form for filing taxes, the 1099-NEC. The 1099-NEC is sent to you and the IRS and is the official record of your contract payments received throughout the year. If you were a contract employee through multiple agencies, you should have more than one 1099-NEC.
If you earned less than $400 for the year, we still suggest you discuss your situation with a tax preparer. There are other filing requirements that may apply to your situation. Furthermore, if you earned less than $600 for the year working PRN shifts through Nursa, you may not receive a 1099-NEC. However, that does not exempt you from claiming the income on your taxes.
What is the Self-Employment Tax?
According to the IRS, the rate for self-employment tax is 15.3%, divided into two parts: social security at 12.4% and Medicare at 2.9%. Deductions do not impact this portion of your taxes.
Why Do You Have to Pay Self-Employment Tax?
You aren't being singled out unfairly by the IRS. Everyone has to pay social security and Medicare taxes. The difference is that staff employees have these taxes withheld from their paychecks by their employers. They never even see the money. Conversely, contract employees are paid without any taxes being withheld, so you have to pay the taxes yourself.
What is the Income Tax?
Again, everyone pays income taxes, not only self-employed contract workers. Staff employees typically have a portion of their paychecks withheld to pay income taxes so that at the time of their annual return, most, all, or excess has been paid, which is then resolved when they file their yearly taxes and either have to pay, break even, or receive a refund.
Contract workers, again, don't have this income tax withheld from their paychecks, so they must pay the entire portion of the income tax owed. If any apply, this portion of your taxes could be reduced by deductions or credits.
Because nothing is withheld from your paychecks, this amount once a year can seem high and, for some, will be a challenge to pay. For this reason, the IRS has established that any self-employed persons spending 1,000 or more for income taxes should break up that amount into quarterly payments.
How Do I Know If I Should Make Quarterly Tax Payments?
We strongly recommend that you work with an official tax preparer or CPA to file your taxes, mainly if you are new to filing with a 1099-NEC. They'll be able to advise you if, due to your income, you should start filing quarterly estimated tax payments this year. You can also try the IRS's website quiz and use the 1040-ES form to determine your quarterly payments.
When Are Quarterly Taxes Due?
- The first quarter taxes are due April 15th and cover income from January 1st to March 31st.
- The second quarter taxes are due June 15th and cover income from April 1st to May 31st.
- The third quarter taxes are due September 15th and cover income from June 1st to August 31st.
- The fourth quarter taxes are due January 15th of the following year and cover income from September 1st to December 31st.
*Information for estimated quarterly taxes payment periods and due dates provided by the IRS.
Contract Nurse Deductions
You may be eligible for the Self-Employment Health Insurance Deduction, allowing you to "deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents."
It's commonly believed that travel expenses can be deductions for taxes, but that only applies to taxes for travel nurses who maintain one permanent residence and then work away from that residence and incur "double" costs of everything. Working local PRN jobs in the town or city near your residence generally only applies to those circumstances.
What is the Difference Between Tax Credits and Deductions?
Deductions are amounts that are deducted from your income and thereby reduce your taxable income. Credits may be applied to reduce the amount of taxes that you owe. The key is that the first is subtracted from your income before tax calculations, while the second is applied after the calculation is completed. For tax tips, check out our How to Manage Your Finances article and set yourself up for better financial health this year.
