For many people, working and doing taxes are simple. You go to work for 8–12 hours per day, fill out a W-2 when you’re hired as a full-time nurse, get one back at the end of the year, and give it to your tax professional by April.
Taxes are taken out for you from every paycheck. Your health plan is determined for you, your retirement plan options are pre-determined…you get the idea.
So, when you’re used to such a streamlined process, managing your schedule and income as a self-employed person can feel overwhelming. In fact, it sounds scary. But it’s not as complicated as it seems — and you shouldn’t let confusion hold you back from both lifestyle and financial gains.
As a healthcare professional, you don’t have to be tied to a single institution. With Praos, crafting the career you want is easier than ever — and we’ve compiled some easy-to-follow tips to help you transition to the 1099 life.
Remember that the information provided here is a set of general guidelines. Always consult with your accountant or tax professional before making any decisions about your taxes.
The perks of per diem nursing work
Contracting comes with a whole slew of benefits that employers aren’t obligated to offer their full-time employees.
First and foremost, perhaps, is the fact that you can “write off” just about everything you spend on work as a business expense (check out the next section to learn more). Lunch? Expense. Phone plan? Expense. Scrubs? You guessed it — expense.
But that’s not all. Being a nursing contractor means you’re only indebted to the schedule you agree to for each individual job. Promptness is king of just about every business, but you get to be prompt to the obligations that work for you. Take your kids to school in the morning? You don’t need to work mornings (ever again). Prefer a few long days to five normal-length ones? You can easily arrange that, too.
Plus, your earning potential is predicated solely on your individual ambition, needs, and desires, not what a single employer is willing to offer you. And, of course, the number of hours in a day…but that’s another topic for another time.
It’s worth mentioning, too, that independent contractors often earn more than their W-2 counterparts. That’s because employers have to contribute to their employees’ health plans, retirement benefits, and tax obligations. That’s not the case for nursing contractors. So, institutions can (and often do) pay contractors more per hour than regular employees.
Potential for better benefits
You have the ability to craft your own benefits as a healthcare contractor. That includes vacation time (no more asking), health benefits (way more options, tailored to your needs) …you see the pattern. It’s no longer just “what the company offers,” but what you want, that’s available for the picking.
Down to brass tax.
Just like lifestyle bonuses, the tax benefits of becoming a nursing contractor (both full- and part-time) can be many. Perhaps the simplest bonus is that you can write off a long list of qualifying business expenses to reduce the total amount of your taxable income which, in turn, reduces the amount of taxes you’re responsible for.
Now, the calculations aren’t the greatest fun, which is part of the reason employing the expertise of a qualified tax professional is key to getting the most out of your per diem nursing dollar.
But, in a nutshell, let’s say you made $60,000 as a contract healthcare worker this year. You had $5,000 in expenses. You’ll (generally) only be taxed on $55,000. So, while write-offs aren’t exactly “free money” like many people believe, using them correctly means that they come out in the wash.
How and what can I claim as expenses?
Use the IRS Form 1040-C to claim business-related expenses for any contract you take through Praos. That includes:
- Transportation costs (like gas)
- Tools needed to complete your job
- Continuing education courses
- Health insurance
- Liability insurance
- Costs associated with maintaining certifications
- Any costs associated with a home office, if applicable (WiFi for finding shifts or a portion of the cost of your phone plan, for example)
Do I still owe taxes as a healthcare contractor?
Yes! When you’re paid for the shifts you complete with Praos or any other organization, you’re paid exactly what you made. But all of that money isn’t yours — some of it is owed to your state and federal government.
Instead of your taxes being automatically deducted from your paychecks by an employer, you must pay that money to the government on a quarterly basis. These payments are called estimated tax payments, and you need to mail them in with a tax voucher provided to you by your tax professional.
That may sound disappointing — who wants to pay money to work, after all? — but it’s important to remember that you’re paying that money on every dollar you earn already. It just doesn’t feel like it because the money never hits your bank account.
What forms you need to stay above-board
But don’t worry: it gets easier from there. If you earn more than $600 from Praos or any other company, you’ll need to submit a W-9 (it looks like this). That’s kind of like a W-2 for contractors, and it provides simple information like your full name and tax ID number. We need to have that on file to let the IRS know what we’ve paid you.
Note: You still need to pay taxes on every penny you earn (even if it’s under $600 from a given company). You may not be asked for a W-9 until you earn that amount, though.
Just like you should, we keep track of how much you make with Praos. At the end of the year, you’ll receive a form 1099-MISC from us detailing that income. You must provide that form to your tax professional when it’s time to complete your taxes.
What’s great about working with Praos is that you get one form 1099-MISC for all shifts you complete through us in a given tax year — instead of a form from each organization you contract with.
We’ve heard from many of our new nurses that embarking on the healthcare contracting adventure is confusing…or downright intimidating. But it doesn’t have to be! The information above has one overarching theme: healthcare contracting, or per diem work, is a freedom-increasing, option-optimizing, slightly more recordkeeping-heavy version of the full-time nursing position you already work.
Sound exciting? We think so, too. Join us on our journey toward a healthcare career where the sky is the limit.