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Locum Tenens- Financial advice....

Discussion in 'Finance and Investment' started by Bernardo_11, Apr 10, 2007.

  1. Bernardo_11

    Bernardo_11 I like Popeye's Chicken. Physician 10+ Year Member

    Feb 9, 2002
    Somewhere in the Pacific
    I'm currently doing a fellowship in Developmental/Behavioral Pediatrics, unfortunately, my fellowship stipend is not enough for me these days as I am now repaying a ton of my medical school loans... being out of residency and licensed in this state allows me to earn some extra moonlighting cash to make ends meet... and to be honest, DB Peds is not entirely a clinically intense fellowship so I have some time to do some extra work every now and then.

    One of them is doing locum tenens for various pediatricians in the community from a few days to a couple of weeks. The money seemed to be coming in well, and I was saving a ton in my bank account.....

    .... then tax time came..... OUCH!

    First off, you get the lump sum.. so all the money you earn is not yours and eventually will have to go to Unce Sam as an income tax. Fair enough... I knew that.

    But remember, as an independent person doing locum tenens, you are now considered a small business and self employed. So doing schedule C made sense. I was able to deduct expenses such as malpractice insurance, using my car to get to the clinics (decided to use the standardized mileage rate), and I'm thinking of using my laptop computer and cell phone purchase (as well as internet and cell phone membership) based on a percentage of business use.

    But what took me by suprise was that self employment tax. Basically, in addition to the 25% (my particular tax bracket as a fellow and moonlighter) you owe the government as income, you have to slap on another 15% to cover social security and medicare costs most regular "employed" people would already have deducted on their paycheck (actually for them they only pay 7.5%, their employer pays the other half, but since you're self employed, you get stuck with both halves).

    So I had this pretty sum of cash sitting in my checking account, thinking I can have some fun this summer, but I just saw it all go away this week.

    Moral of this story for locums (or any other independent moonlighters for that matter)..... keep your records. Save your internet, cell phone bills, car mileage rates or car repair costs, malpractice premiums, licensure expenses, books which you purchase and use for your trade.... etc... ANYTHING which is remotely related to your business. Because they can possibly help you a bunch come tax time. Oh yeah and remember that 1/2 you pay for the SE tax is deductible from your overall income.

    For any experienced independent moonlighters or locum tenen peeps out there, please feel free to add more advice.... I'm definitely open to hearing some suggestions. For the locum peeps out there, unless you are hired as an employee for a locum agency, realize you're a "one man" small business, so anything earning you get from the docs you cover.... a good rule of thumb is to consider 50% already owned by uncle sam.

    (thinking now that a flat tax [of all types of earnings] may actually be a good idea)
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  3. mshheaddoc

    mshheaddoc Howdy Moderator Emeritus 15+ Year Member

    Apr 24, 2002
    Wild west of Mistytown
    That is great advice that any moonlighter should know. Have you considered highering an accountant to help you? Just curious. Schedule C (and/or even forming an corporation) can be worth the accountant if you are not familiar with tax laws, deductions, and other "tricks" to keep your income. You'd be surprised some of the creative "self-employed" tax returns I have seen.

    Also if anyone else has any comments this is a great topic for this forum and I'd like to expand on it.
  4. Bernardo_11

    Bernardo_11 I like Popeye's Chicken. Physician 10+ Year Member

    Feb 9, 2002
    Somewhere in the Pacific
    Thanks for the compliment. Unfortunately, all of my tax knowledge is "Self-learned" which is okay being in medicine, right? :) I also was really bad about saving receipts last year, so it may be difficult to be all that creative with schedule C. I'm considering seeking accountant advice next year, especially now that I am keeping my records/receipts around. Believe me though, I've read those irs publications up and down trying to see what I could possibly use as a deduction.

    I'd like to know what some other moonlighters have done successfully... have they been able to claim a "home office" despite their apartments being tiny and the desk being in the living room? Were all books deductible? Cell phone? Laptop Computer? Did you guys use a section 179 for these or did you decide to deduct from them each year?
  5. mshheaddoc

    mshheaddoc Howdy Moderator Emeritus 15+ Year Member

    Apr 24, 2002
    Wild west of Mistytown
    I started a thread in the residency forum to try to drum up discussion on this topic. Maybe get a few people to discuss. I think this would make a great article for SDN and I might try to find an accountant who'd be willing to discuss and interview. And the fact that you want to know what you are getting into and are trying to understand it is a step ahead from most other people. Even if you use an accountant its not always best to have "blind trust" in them. Because when it comes time for an audit, you are the one that would have to pay, not them ;)
  6. n_a_t

    n_a_t Junior Member 5+ Year Member

    Aug 15, 2004
    middle-of-nowhere, USA
    don't forget self-employed ira, you can put away up to ~20% of your self-employed earnings into IRA (or up to some maximum amount, ~40K i think) and have taxes be defferred till you take the money out (works like a traditional ira, not a roth). of course, today would be the deadline... and of course this would only apply if you wanted to save/invest/have the money sitting in a bank account, but would not if you wanted to spend it on a vacation, or whatever...
  7. zeloc

    zeloc Senior Member Physician Faculty 10+ Year Member

    Aug 22, 2003
    Bringing up old post.

    Why would someone working in locum tenens be considered self-employed and have to pay those taxes? Aren't you an employee of each of the practices/hospitals you work for?
  8. southerndoc

    southerndoc life is good Physician Moderator Emeritus Lifetime Donor Classifieds Approved 10+ Year Member

    Jun 6, 2002
    Zeloc, if you're an independent contractor, you actually get a lot of tax deductions that aren't available to regular employees. Plus you also get paid more (usually).

    I prefer being an independent contractor. Yes, it is more work managing your own retirement, health insurance, etc., but I think the benefits are greater.
    sso_blasted87 likes this.

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