First 90 Days as a Locum Tenens Physician

You do not need an LLC or an S-corporation to accept your first locum tenens assignment. As a sole proprietor, you can start working, get paid on a 1099, and report that income on Schedule C with no formal entity in place at all. That's the default, and it's perfectly fine for a first assignment.

What you should do before or immediately after signing that first contract is simpler and takes about an hour: get an EIN (Employer Identification Number) from the IRS, free and instant online, and open a dedicated business checking account. You can technically operate as a sole proprietor using your Social Security number and a personal account, but doing so creates two problems that compound over time.

Sole Proprietor vs. S-Corp: Timing Matters

Don't rush into an S-corporation election before your first assignment. An S-corp adds real costs, payroll processing, a separate tax return, reasonable-compensation calculations, and those costs only pay for themselves once your net self-employment income reaches a level where the self-employment tax savings outweigh the added complexity. Most CPAs who work with locum physicians wait until income is established, often after the first assignment or two, before recommending the switch.

Keeping business and personal transactions separate makes the next steps easier, whatever entity you choose. Open the dedicated account before your first deposit if you can. Once several months of payments and everyday spending are mixed together, even a straightforward review becomes a sorting project.

A new assignment can quickly push bookkeeping down the list. You are learning a facility, seeing patients, and finishing paperwork; keeping receipts feels like something that can wait until the weekend. Months later, it is much harder to remember whether a hotel stay was for a shift or a conference, or where the receipt for replacement equipment went.

Give yourself a simple system you will use. Before the first shift, decide where these three types of records will go:

• A mileage log, date, starting point, destination, purpose, and miles for every business trip, including drives to and from assignment locations and any local travel between facilities
• A receipt system, even a labeled folder or a phone photo habit works; capture licensing fees, credentialing costs, scrubs and equipment, CME, malpractice tail coverage, and any supplies you pay for out of pocket
• A per diem or actual-expense record, track days spent away from your tax home so meal and incidental expenses can be substantiated at tax time

A spreadsheet with a date, category, amount, and business purpose is a useful place to start. Keep the receipts with it, then set aside a few minutes each week to bring the records up to date. You can move to bookkeeping software or bring in a bookkeeper when you need more support.

The habit matters more than the software.

This is the part that catches almost every first-time 1099 physician off guard. As a W-2 employee, taxes came out of every paycheck automatically. You never had to think about it. As a 1099 locum physician, nothing is withheld. Your full gross pay hits your account, and it's on you to set aside and pay taxes on it yourself.

The IRS expects quarterly estimated tax payments throughout the year, not one lump-sum payment the following April. The due dates generally fall in mid-April, mid-June, mid-September, and mid-January of the following year, and they don't line up evenly with calendar quarters. If your first assignment starts mid-year, your first payment is typically due on whichever of those dates comes after you start earning 1099 income.

The practical challenge in month one is that you often don't have a full year of income data to project from. You have one contract, maybe a partial year of pay. A CPA who works with locum physicians can build a first-quarter estimate from your actual contract rate and expected hours, factoring in self-employment tax, so you're not just picking a percentage out of the air.

Here's a hypothetical to make the mechanics concrete. Say a locum physician signs a contract paying $20,000 a month starting July 1. That's $120,000 of gross 1099 income by December 31, with nothing withheld. Using a 30% set-aside as a starting point, she moves $6,000 of every $20,000 check into a separate tax savings account the day it lands, then pays the IRS from that account on the September and January due dates. When her CPA runs a real projection in the fall, factoring in her actual deductions and self-employment tax, the set-aside gets adjusted, but she's never staring at a $36,000 surprise the following April.

By months two and three, the mileage log and receipt folder you started in week one should be a habit, not a chore. This is also the point where it's worth understanding the tax home concept, even if you're not deep into it yet. Your tax home is the general area of your main place of business, and it's the foundation for whether your travel, lodging, and meal expenses at an assignment location are deductible at all.

You don't need to master every detail of tax home rules in your first 90 days. What you do need is to start building the record that supports it: a calendar showing where you worked and where you returned to between assignments, records of any permanent residence you maintain, and documentation of your assignment durations. If your locum career grows into a multi-year pattern of travel across states, this early documentation is exactly what protects your deductions if the IRS ever asks questions.

Keeping those records as you go also gives your CPA something concrete to review. If an assignment is extended or your work pattern changes, raise it while there is still time to understand the effect on your tax home and travel expenses.

For the full mechanics of the tax home test and how it affects your deductions, see our Locum Tenens Tax Home Guide.

Before your first tax season, check that the system is doing its job. Can you find the records behind your expenses, explain the payments you have made, and see which decisions still need attention? Use these three questions to guide a review with your CPA:

1. Have you reviewed your estimated payments?

Bring your contracts, income to date, and payment history to the review. If the year has gone differently from the original projection, your CPA can work through what needs updating and explain the next payment.

2. Are your records complete?

Compare your expense records with your bank activity and assignment calendar. Resolve missing receipts or unclear transactions while you can still recall the details, and keep a note of questions for your CPA.

3. Does your business setup still fit?

Your first contract may have been a trial run; several months later, locums may be your main source of income. Revisit the entity decision using the work you actually expect to do, including the cost of payroll, returns, and any additional state obligations.

These checks do not need to become another large project. A short review during the year can give you a manageable list of next steps and keep questions from piling up until filing season.