As independent contractors, locum tenens physicians and advanced practice providers enjoy a level of freedom and flexibility that full-time roles often can’t match.
You decide where, when, and how much you work, and have more control over your income and financial planning. It’s no surprise that more clinicians are choosing this path.
Working as a 1099 clinician comes with responsibilities that may be unfamiliar if you’ve only held W-2 roles before. Understanding the business aspects of independent contracting is crucial to establishing a stable and rewarding career.
That’s why we’ve created this practical guide to help locum tenens physicians and APPs like you confidently navigate essential topics, such as insurance, taxes, and financial planning.
Let’s dive in.
Table of Contents
What Does Your 1099 Status Really Mean?
If you’re moving from a permanent position to contract work, you’ll want to know the key differences between W-2 and 1099 employment. As a 1099 clinician, you’re considered self-employed. You’ll be paid in full, without taxes withheld, and you’ll be responsible for handling your own health insurance, retirement savings, and tax filings.
Key differences include:
- W-2 employees have taxes withheld automatically; 1099 clinicians must pay taxes independently.
- W-2 roles typically include benefits such as health insurance and retirement plans, whereas 1099 roles do not.
- W-2 employees follow employer-set schedules; 1099 clinicians choose the number of shifts and assignments they want to accept.
While managing your income can be empowering, it also means navigating benefits on your own, especially healthcare. Without employer-sponsored coverage, choosing the right health plan becomes critical in managing your 1099 status.
How Do You Choose a Health Plan?
Most W-2 employees receive health insurance and dental plans through their employer. As a 1099 contractor, you’re responsible for finding the best plan that works for you. Here are a few of your best options for finding quality health insurance at a fair price.
- Private insurance plans are available through the health insurance marketplace. As opposed to W-2 employees, you have the freedom to choose whatever type of plan you want, from premium plans with low deductibles to more bare-bones plans that are inexpensive. However, know that buying insurance as a private citizen is often more expensive than an employer insurance plan.
- Professional associations, such as the American Medical Association and the American Association of Nurse Practitioners, offer customized plans for physicians and APPs. Since they negotiate group rates on your behalf, you can often qualify for lower rates and better coverage. However, you need to be a member of these organizations to qualify for their insurance plans.
No matter which plan you choose, consider pairing it with a Health Savings Account (HSA). HSAs allow you to set aside pre-tax dollars for qualified medical expenses, thereby reducing your taxable income. You can also invest your HSA funds, offering the potential for long-term growth while covering healthcare costs.
What Are The Best Retirement Savings Accounts For 1099 Contractors?
Traditional employer-sponsored retirement plans, like 401(k)s, aren’t an option for 1099 clinicians, but there are still plenty of ways to save for the future. As a 1099 contractor, you can contribute much more toward retirement than most W-2 employees. This allows you to build savings at a faster pace. Here are some of the top retirement account options available to you:
- Solo 401(k)s allow independent contractors to make both employee and employer contributions. For 2025, you can contribute up to $70,000, although your employer contributions cannot exceed 25% of your total compensation. You can choose between a traditional account, where taxes are deferred until withdrawal, or a Roth option, where you pay taxes upfront but withdraw funds tax-free in retirement.
- Simplified Employee Pension (SEP) IRAs allow self-employed clinicians to contribute up to $70,000 in 2025, far exceeding the $7,000 limit for traditional or Roth IRAs. However, contributions are capped at 20% of your net earnings, so you may not reach the full limit each year. Even so, SEP IRAs offer significantly more savings potential than most retirement plans available to W-2 employees.
- Cash balance plans are a type of defined benefit pension that allows self-employed clinicians to contribute up to $341,000 per year on a tax-deferred basis. While these plans are commonly offered to W-2 employees, 1099 clinicians can establish them independently. Each year, a fixed contribution, either as a lump sum or a percentage of income, is added to the plan and invested. Although they offer the highest contribution limits, cash balance plans have strict annual funding requirements and limited flexibility. They are best suited for clinicians with consistent, high income.
As a 1099 employee, you’re in a strong position to build long-term financial security. Partnering with a tax advisor or your staffing firm can help you make the most of every opportunity.
What Are The Most Common Tax Deductions For Locum Tenens Clinicians?
As an independent contractor, tax season brings a distinct set of responsibilities. Unlike W-2 employees, 1099 clinicians are responsible for setting aside their own taxes and making estimated quarterly payments throughout the year to avoid penalties.
While taxes may seem overwhelming at first, they come with the opportunity to reduce your burden through standard and valuable deductions. Some of the most common include:
- Home office deductions: If you regularly use a dedicated space in your home for work, such as charting, licensing, contract management, or communication with staffing partners, you may qualify for a home office deduction. You can deduct a portion of your rent or mortgage, utilities, insurance, and maintenance based on the size of your workspace.
- Travel deductions: If you use your personal vehicle for work-related travel, you can deduct mileage using the IRS standard rate. In 2025, that rate is 70 cents per mile. For example, driving 500 miles would result in a $350 deduction. Although itemizing gas and maintenance costs is an option, most clinicians find the standard mileage rate easier and more efficient.
- Continuing medical education (CME): Professional development expenses are often tax-deductible. This includes airfare, lodging, registration fees, board prep courses, journal subscriptions, and certifications like ACLS or BLS, as long as they’re required for your role or necessary to maintain your license.
No matter which deductions you claim, keeping accurate records is crucial. Save all receipts, track your mileage, and consider using bookkeeping software or working with a tax advisor, especially if you’re working in multiple states.
How Can You Be Sure You Have the Right Malpractice Coverage?
Many healthcare staffing agencies provide malpractice insurance, but there may be situations where you’re responsible for securing your own coverage. Let’s explore the two primary types of policies and what they mean for your protection:
- Claims-made coverage: This type of policy protects you only if both the incident and the claim occur while your policy is active. To extend your coverage after your contract ends, you may need to purchase tail coverage, which protects you against claims filed after your policy expires, so long as the event happened while your coverage was in effect. Claims-made policies are often more affordable upfront but come with additional costs later.
- Occurrence coverage: An occurrence policy protects you from claims related to any incident that happens while the policy is active, even if the claim is filed years later. This coverage typically has higher premiums but doesn’t require tail coverage.
No matter which type of policy you choose, be sure to review all contracts carefully before signing. Understanding your liability terms and the scope of your practice helps protect your license, finances, and peace of mind.
How Can You Negotiate Better Contract Terms?
Before signing a contract, research average compensation for your specialty and region. Resources such as MGMA, the AAFP Career Benchmark Dashboard, and healthcare staffing agencies can help you benchmark fair pay and benefits.
In addition to your base pay, it’s wise to negotiate key extras that can add significant value to your contract. Common negotiable items include:
- Housing and travel stipends: Often included in locum tenens contracts, these can help cover the cost of temporary assignments and reduce out-of-pocket expenses.
- Licensing and certification reimbursements: Look for coverage of costs related to state licenses, DEA registration, and required certifications.
- CME allowances: Many contracts include funding for continuing medical education, including courses, conferences, or study materials that support your clinical development.
Most staffing agencies expect some level of negotiation; it demonstrates that you’re informed and engaged. Focus on what matters most to you, ask for all terms in writing, and consider reviewing the agreement with a contract attorney for clarity and peace of mind. With preparation and a professional approach, you’ll be well-positioned to secure a role that aligns with both your financial goals and personal priorities.
How Can You Shape Your Vacation Time?
While locum tenens clinicians don’t have access to paid time off like most W-2 employees, they instead have the freedom to shape their schedules. Whether you’re looking to take time off between contracts, increase your hours to meet financial goals, or simply enjoy more authority over your day-to-day life, how you integrate vacation time into your schedule is your choice.
Here are a few ways independent clinicians tailor their schedules to fit their lives:
- Take extended breaks: Want to enjoy a summer abroad or take a winter getaway with your family? Many clinicians take several weeks—or even months—off between assignments to recharge or travel.
- Maximize earnings: If you’re energized and focused on financial goals, you can take on more assignments. Some clinicians use this strategy to save for early retirement, home purchases, or college tuition.
- Prioritize what matters most: Whether it’s attending a child’s soccer game or caring for aging parents, flexible scheduling lets you be more present for life’s essential moments.
Take Charge of Your Career
Independent contracting offers a unique opportunity to manage your career, finances, and lifestyle. With thoughtful planning around insurance, retirement, taxes, and scheduling, you can build a career that’s not only flexible but deeply rewarding.
At OnCall Solutions, we’re here to support every step of your journey. Whether you’re exploring your first 1099 role or looking to optimize your current path, we’ll connect you with opportunities that align with your goals. Connect with us today.
