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.

Here's what actually happens to physicians who don't set up bookkeeping in week one: they start the assignment, get busy with credentialing and orientation and actual patient care, and tell themselves they'll track expenses "once things settle down." Things never settle down. By the following February, they're trying to remember how many miles they drove to the hospital in March, whether that hotel stay in June was for a CME conference or a locum shift, and where the receipt for their stethoscope replacement went.

The fix isn't complicated. It doesn't require software or a bookkeeper in week one. It requires three things, started before your first shift:

• 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

This matters more for locum physicians than for almost any other 1099 profession, because the dollar amounts involved in travel, lodging, and licensing across multiple assignments add up fast, and every dollar you fail to document is a deduction you can't claim, even if you genuinely qualify for it.

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.

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.

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

If there's one pattern that shows up again and again with first-year locum physicians, it's this: they wait until tax season to engage a CPA, and by then the damage is already done. Three specific things tend to go wrong, in roughly this order:

1. Missed Quarterly Deadlines

Without a CPA calculating estimates from month one, most first-year 1099 physicians either skip quarterly payments entirely or guess at a number that's too low. Both paths lead to the same place: a larger-than-expected bill the following April, plus a penalty for underpayment.

2. Deductions Reconstructed From Memory

Without a bookkeeping system running in real time, physicians try to rebuild a year of mileage, per diem, and receipts from bank statements and vague recollection. This almost always understates real deductions, because the expenses you can't document, you can't claim, even if they were genuinely business costs.

3. No Entity Strategy Until It's Too Late to Matter for the Year

Physicians who wait until filing season to think about entity structure miss the window to make decisions that only work if set up during the year, not after it ends. An S-corp election, for example, generally needs to be in place and running payroll well before year-end to produce meaningful savings for that tax year.