At ProLocums, we believe there is no one-size-fits-all way to organize partnerships with hospitals, and the same applies to our relationship with the physicians we hire to care for patients.
Whether you are employed and receiving a W-2 or are an independent contractor physician receiving a 1099 depends on various factors including specialty and role. Most physicians have been W-2 employees at some point, so they inherently understand this model. The independent contractor (IC) model is a little more foreign to many, so it is important to understand the pros and cons of this tax status.
Transitioning from an employed model to being an independent contractor physician (ICP), or starting your career as an independent contractor, presents a variety of often bewildering questions. One of the first is likely about the difference between forming an LLC and an S Corp.
Choosing the right business structure is a complicated question that depends on your state, personal financial goals, and family needs. To help physicians navigate these choices, we've teamed up with DocWealth.io, which specializes in providing CPA services for 1099 physicians to maximize their earnings. Consulting with a professional like DocWealth.io can help you come up with a plan that fits your particular situation and needs.
In this article, we will discuss why being a 1099 physician is the best option and explore whether you should form an S Corp or an LLC to maximize your financial benefits.
When deciding between forming an LLC or an S Corp as a 1099 physician, it's crucial to understand the distinctions and benefits of each structure.
S Corporation (S Corp): An S Corp, or S corporation, is a type of business entity that offers the advantage of pass-through taxation. This means that the company's profits and losses are passed directly to the individual owners, who report them on their personal income tax returns. This structure helps avoid the double taxation commonly associated with traditional C corporations. Owners of an S Corp can also save on self-employment taxes, as they can take a reasonable salary and distribute remaining profits as dividends, which are typically taxed at a lower rate. [not subject to additional self employment taxes.]
Limited Liability Company (LLC): An LLC, or limited liability company, blends the benefits of a corporation with the flexibility of a partnership or sole proprietorship. LLCs are relatively easy to establish and operate, offering significant flexibility in how they are taxed and how profits and losses are allocated among the owners. The members of an LLC are not personally liable for the company's debts and obligations, providing a layer of personal asset protection. Profits can be distributed among one or more members, making it a versatile choice for many business owners.
Contrary to popular belief, the primary purpose of forming an LLC for physicians is not necessarily to shield from liability, but to create an opportunity to save money through electing S Corp taxation.
How Does an LLC Help Lower Your Tax Bill? An LLC can choose to be taxed as an S Corp, allowing the business owner to take advantage of pass-through taxation while also potentially reducing self-employment taxes. By electing S Corp status, the physician can receive a portion of their income as a salary (subject to payroll taxes) and the remaining as a distribution (not subject to self-employment tax), leading to overall tax savings.
Many independent contractor physicians opt to form an LLC for its ease of setup and then elect S Corp taxation for federal tax benefits. This setup allows physicians to benefit from the simplicity of an LLC while enjoying the tax advantages of an S Corp.
Here’s how it works:
1. Formation and Election:
2. Revenue Flow:
3. Salary and Distributions:
As both the employer and employee, the independent contractor physician can significantly reduce self-employment taxes. For 2024, the self-employment tax rate is 15.3% on earnings up to $160,200, with an additional 2.9% on income above this threshold. By balancing W-2 wages and distributions, physicians can save thousands of dollars annually, primarily on payroll taxes, while still meeting their income tax obligations. This strategy offers substantial savings for independent contractor physicians.
Dr. Smith owns Smith Medical, LLC. ProLocums pays Smith Medical, LLC $325k through 1099 payments. Smith Medical, LLC then pays Dr. Smith a $125k salary via W-2. As a result, Dr. Smith’s payroll tax is calculated only on the $125k salary instead of the entire $325k.
Payroll Tax Implications Without an LLC:
Payroll Tax Implications With an LLC:
By structuring his income this way, Dr. Smith saves over $10,000 in payroll taxes.
The next common question is, “What about the $200k that I’m not taking as wages?” That $200k remains your money and can be accessed through owner distributions or dividends. You can transfer these funds from your business bank account to your personal account with ease. The advantage here is that this $200k is not subject to payroll tax, though it is still subject to income tax.
Forming an LLC and electing S Corp taxation has numerous benefits, but there are also potential downsides. These include compliance with additional tax rules and regulations specific to S Corps. Physicians considering this option should weigh the benefits and drawbacks and consult a tax professional before making a decision. For more information, visit DocWealth.io.
In recent years, the tax landscape for independent contractors has become increasingly complex, making much of the existing online information outdated. Consulting with a tax professional is crucial for understanding your specific situation.
Qualified Business Income (QBI), outlined in Section 199A of the tax code, refers to net income from a qualified trade or business eligible for deductions under the Tax Cuts and Jobs Act of 2017. For independent contractor physicians, this income is eligible, but only if it falls under certain thresholds:
QBI Example:
Understanding QBI and its implications can significantly impact tax planning and savings for independent contractor physicians. For more detailed advice tailored to your circumstances, visit DocWealth.io.
The 2017 tax law that introduced QBI also capped state and local tax (SALT) deductions at $10,000, targeting high-income earners like physicians. To counteract this, many states have introduced or proposed a Pass-Through Entity (PTE) Level Tax. If your state offers PTE, you can pay a portion of your state income tax through your LLC and receive a federal deduction.
For Example:
This strategy allows high earners to navigate the SALT deduction cap effectively.
Organizing an LLC and paying yourself as an employee adds complexity but can lead to substantial savings. In the examples above, Dr. Smith could save:
These figures don’t include potential savings from retirement contributions or business deductions. While these examples are simplified and may not apply to your specific situation, the potential benefits are significant.
For personalized advice, consult your CPA or schedule a free 30-minute session with DocWealth.io.
As organizations seeking healthcare staff, it becomes important that your organization chooses the right agency to address your staffing needs. Healthcare recruiters have a host of locum tenens agencies they can engage with who promise to provide the best providers and services. But a good healthcare staffing agency does not merely connect you with qualified providers; it makes the jobs easier by assessing your organization and getting you solutions.
Below are the fundamental criteria that should be used when comparing the various entities in the healthcare staffing agencies and why ProLocums is the best partner for you.
Current and future staffing may work very differently in different specialties, it depends on the position’s urgency, and the number of available positions. The right agency should give a wide range of candidates across various specializations in a way that they can qualify your needs. Many providers increase the probability of identifying suitable candidates for provided openings.
ProLocums has the ability to place providers of all specialties in different healthcare facilities throughout the country. This is why our service can provide you a match within short time and confirm your cooperation with our candidates.
Even the number of providers is not sufficient; it is the quality of the provider that is also very important. It is also easy to find such an agency which has a very strict scrutiny done during the screening of the candidates for the healthcare providers’ employment.
Quality is our flagship at ProLocums. Our credentialing process internally is very stringent in ensuring that the candidate who is to be employed meets standards of competency as well as professionalism thus assuring the clients.
Vacancies can result in costs, undermined staffing strength and dissatisfied customers. A recruitment company that is effective in proceeding to meet a company’s needs for staffing without neglecting the important aspect of quality is essential.
The recruitment process is fast, efficient and accompanied by extensive networks that ProLocums employs to ensure that staffing solutions are met. This allows us to reduce interruptions and maximize the efficient operation of your organization.
Your organization might require coverage of intermittent locum tenens positions, or permanent ones, or may have requirements for both types. There are agencies which specialize in a given type of staffing, whereas offering fewer choices for your business might complicate the recruiting process. Having a single source of consultant that can provide temporary and permanent staffing makes it easy since it saves time.
Established as one of the first providers of locum tenens staffing services, ProLocums also specializes in permanent placement. This flexibility allows us to meet both your immediate and perpetual staffing requirements while assisting you in maximizing your revenues and patient outcomes.
In the case where a given facility needs more than one type of healthcare professional, staffing capacities of an agency must be considered. Whether you are looking for physicians or allied health staff, using different types of provider opens the door to a more efficient hiring process.
Among them, physicians and allied health professionals are included in the ProLocums pool. This flexibility provides a convenient opportunity for us to meet your needs in the most efficient manner.
New sources of telehealth have emerged and virtual visits account for 17% of all patient visits in 2023. In the future, such an agency should serve not only to support staff for telehealth programs but also to assist organizations in the establishment of effective virtual care systems.
We specialize in telehealth staffing and offer consultation for organizations on the establishment and effective management of telehealth services which positions us as the go to solution for organizations in modern health care delivery.
ProLocums is not just a staffing service provider, but the solution you need to turn your staffing problems into innovative staffing solutions optimized for quality, speed and agility.
This means that it is essential to spend time to evaluate the various healthcare staffing companies as the first proportion in directing your staffing organization in the most appropriate direction.
Finding a right partner will change your staffing process, relieve all the stress and improve the quality of service being provided. Get in touch with ProLocums today.
01/17/2025
In healthcare, locum tenens is a term derived from the Latin phrase meaning “placeholder.” It refers to professionals hired to temporarily step in for another provider during their absence due to reasons such as illness, vacation, maternity leave, or continuing medical education. These professionals, often called “locums,” fulfill the same duties as regular providers, ensuring continuity of care for patients. However, there are important distinctions between locum tenens providers and temporary staff, especially regarding medical credentialing services.
Understanding these differences is crucial for healthcare organizations, as each category of provider is subject to different federal guidelines and requirements.
The primary distinction between locum tenens providers and temporary staff lies in their duration of service requirements.
While these terms are often used interchangeably, they are not synonymous when it comes to compliance and reimbursement. Organizations must carefully distinguish between the two to avoid administrative complications or delays in payment.
A locum tenens provider has several defining characteristics that set them apart from regular temporary staff. These include:
1. Traveling Clinician Role
Locums often work with one or more agencies, taking temporary placements in various geographic locations as needed. They typically do not maintain their own independent practices.
2. Specific Circumstances for Engagement
Locum tenens professionals are hired due to specific, temporary unavailability of the regular provider, such as medical leave or professional sabbaticals. They are not used to cover routine staff shortages or regularly scheduled time off.
3. Patient Service Flexibility
Locums may provide services beyond the regular provider’s office, ensuring continuity of care for the patients of the absent clinician.
4. Service Period Restrictions
Medicare guidelines specify that locum tenens professionals cannot provide services for more than 60 consecutive days for the same absent provider.
The documentation requirements for locum tenens providers are stringent, making it essential for health systems to adhere closely to federal guidelines.
1. Independent Contractor Status
Locum tenens professionals are considered independent contractors, not employees. They are typically compensated on a fixed per-day basis by the regular provider or the agency placing them.
2. Documentation Requirements
The regular provider must:
3. Special Cases for Post-Operative Care
Substitution services during the post-operative global fee period should not be identified as locum tenens services on claims.
4. Group Practice Exceptions
In group practices, if a locum tenens provider replaces a departing physician, they may be considered part of the group until a permanent replacement is hired. This is allowed as long as the locum’s services to Medicare patients do not exceed the 60-day limit.
If the circumstances of the provider’s employment fall outside the scope of the locum tenens guidelines, the substitute is classified as temporary staff. In such cases, they must undergo the full credentialing process of the host organization, including background checks, licensure verification, and payer enrollment.
Locum tenens providers are a valuable solution for healthcare systems facing temporary provider shortages. They ensure that patients continue receiving uninterrupted care while allowing organizations flexibility to address staffing challenges. However, adhering to the appropriate credentialing guidelines is critical to:
Navigating the complex rules of locum tenens and temporary staffing can be challenging. ProLocums offers credentialing verification services to assist healthcare organizations in managing locum tenens providers efficiently. From credentialing to payer enrollment and licensure applications, ProLocums ensures compliance and helps organizations meet their temporary staffing needs seamlessly.
By understanding and applying the correct rules for locum tenens providers, healthcare systems can make the most of this flexible staffing option while maintaining compliance and delivering high-quality patient care. For more details, visit Prolocums.com.
12/11/2024
If you’re a physician looking for flexibility and additional income without the commitment of a full-time position, locum work could be the perfect solution for your off days. Locum allows doctors to fill in at facilities experiencing physician shortages, offering supplemental pay and the freedom to set their own schedules. In this blog, we’ll explore why many physicians are opting for locum physician jobs, how these roles help doctors manage their time and careers more effectively, and how you can take advantage of this growing trend.
For physicians looking to avoid the pressures and long-term commitments of full-time practice, a locum job provides an ideal way to maintain a flexible work-life balance. Let’s dive into some of the key reasons why locum work is becoming so popular for physicians.
One of the greatest advantages of locum work is the scheduling flexibility it offers. Physicians can take on locum jobs during their off days from their regular practice or between more permanent commitments. You can choose when and where to work, allowing you to craft a schedule that works around your lifestyle.
This flexibility is especially beneficial for doctors looking to reduce burnout or avoid the rigidity of a traditional practice. If you’ve been feeling overworked or drained, locum work offers a change of pace, giving you the ability to work as much or as little as you want.
If you find that your current position is causing burnout or just need a change of scenery, locum jobs allow you to travel. You can work in different locations across the country, or even internationally, all while practicing medicine. This can be a great way to reignite your passion for your profession by experiencing new healthcare environments.
Locum physician job also provides opportunities to travel to desirable geographic locations. If you’ve always wanted to explore new cities or regions, why not get paid while doing so? With positions available nationwide, you can choose where you work, whether you prefer staying closer to home or traveling to new and exciting places.
One of the most immediate financial benefits of locum work is the opportunity to earn extra income. Whether you’re paying off student loans, managing debt from opening your own practice, or looking to boost your savings, a locum job can provide a reliable stream of additional revenue.
Doctors can adjust the amount of work they take on, depending on their financial goals. If you need to make a significant dent in your student loans or other debt, you can increase your locum hours.
Working as a locum physician gives you the unique opportunity to experience a variety of healthcare settings. This exposure helps you improve and diversify your skills. You’ll get to work in different specialties, practice in diverse clinical environments, and collaborate with various medical teams, each offering new learning experiences.
Moreover, locum doctor jobs allow you to try out different healthcare facilities before deciding on a permanent job. This can help you find the ideal work environment and refine your preferences when it comes to patient care, work culture, and medical specialties.
Finding the right locum job is crucial for maximizing the benefits of this career option. Working with a reputable medical staffing agency can streamline the process, making it easier to match with positions that align with your skills, preferences, and schedule. These agencies maintain extensive databases of available locum jobs, and they can help you find opportunities that best fit your lifestyle.
By working with a staffing agency like ProLocums, you can save time and effort searching for positions, and you’ll benefit from expert guidance in navigating the locum job market. Whether you’re interested in staying close to home or using your schedule to travel, there are countless opportunities available to you.
Locum positions are an excellent option for physicians seeking flexibility, additional income, and the opportunity to explore new environments. Whether you're looking to pay off debt, improve your skills, or reduce burnout, locum jobs allow you to create a fulfilling and balanced career. By finding the right placement and managing your schedule wisely, you can enjoy the benefits of locum jobs while maintaining a positive work-life balance.
If you’re considering taking on locum work, get in touch with a trusted staffing agency like ProLocums to help you find the perfect position for your needs.
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