Nurses, Locums and Therapists on 1099 Who Owe the IRS

Why 1099 nurses, locums and therapists end up owing

Travel nurses on contract, locum tenens physicians and nurse practitioners, per diem therapists, home health clinicians and private-practice counselors are often paid as independent contractors. The IRS tells businesses that they generally “do not have to withhold or pay any taxes on payments to independent contractors.” The whole tax arrives at filing time, in two layers:

• Income tax on your profit, at your normal rates.
• Self-employment tax of 15.3% (IRS.gov, 2026) for Social Security and Medicare, owed once net earnings from self-employment reach $400. IRS Topic 554 says it generally applies to 92.35% of net earnings, and you can deduct half of it when you figure adjusted gross income.

Clinicians are often surprised by how much higher this is than on a W-2 job, where the employer pays half of Social Security and Medicare and withholds the rest. The general self-employment picture is in our 1099 tax bill guide; this page covers what is specific to healthcare work.

The forms you will see

• Form 1099-NEC from each clinic, agency or practice that paid you. For tax years beginning after 2025, the 2026 instructions raise the reporting threshold for nonemployee compensation to $2,000.
• Form 1099-MISC, box 6 for medical and health care payments, such as insurers paying a provider, also at $2,000 or more under the same instructions.

A missing form does not make income nontaxable. The IRS matches the forms it receives against your return, and a gap produces a CP2000, which the IRS says “isn’t a bill” but proposes changes you must answer. If one arrives, see how to dispute an IRS balance.

Contractor or employee: check your classification

Healthcare staffing uses both models, and some clinicians get a W-2 from one facility and 1099s from others in the same year. The label on your contract is not the test. The IRS looks at the whole relationship and “the extent of the right to direct and control the worker,” grouping the evidence into three categories:

If your status is unclear, you or the business can file Form SS-8 and the IRS will decide; the IRS says this can take at least six months. If you believe you were an employee paid as a contractor, the IRS says some misclassified workers can use Form 8919 to report only the employee share of Social Security and Medicare tax on those wages. Your classification affects how much you owe, so settle it before you file, not after a bill arrives.

Travel assignments and your tax home

For self-employed clinicians, travel costs can be deductible business expenses, but only if you are traveling away from your tax home. Publication 463 defines it as “your regular place of business or post of duty,” and sets two rules that decide many travel-healthcare cases:

• Temporary vs indefinite. An assignment in one place is temporary if it is realistically expected to last, and does last, one year or less. An assignment expected to last more than a year is indefinite, and that location becomes your tax home.
• Itinerant workers. If you have no regular or main place of business and no place you regularly live, your “tax home is wherever you work,” and you “can’t claim a travel expense deduction because you are never considered to be traveling away from home.”

Keep a log of each assignment’s dates and location, and records of where you maintain your home. What the IRS asks for when it examines these deductions is on our travel and meals audit page and vehicle expenses audit page; the broader picture is in audits of self-employed people.

Working in several states. Contract work across states can mean state returns in more than one state. Those are state tax matters with their own rules. This guide and Global Gate Tax Relief deal with federal IRS balances only, so use a preparer who handles each state you worked in.

Estimated tax: paying as you go between contracts

The 2026 Form 1040-ES says you generally must make estimated payments if you expect to owe at least $1,000 (IRS.gov, 2026) after withholding and refundable credits. The 2026 due dates are April 15, June 15 and September 15, 2026, and January 15, 2027. You generally avoid the underpayment penalty if your withholding and on-time payments cover the smaller of 90 percent of your 2026 tax or 100 percent of your 2025 tax; if your 2025 adjusted gross income was over $150,000 ($75,000 if married filing separately for 2026), the second figure is 110 percent.

• Set money aside per contract. Move a fixed share of every payment into a separate account the day it arrives.
• Uneven year? If you take months off between assignments, the annualized income installment method (Form 2210, Schedule AI) matches payments to when you earned the money.
• Mixed W-2 and 1099 year? A new Form W-4 at the W-2 job can raise withholding to cover the contract income.

Pay through your IRS Online Account, IRS Direct Pay or EFTPS.

What the IRS can levy: agency payments and Medicare reimbursements

Collection starts with a bill such as CP14, then a CP504, then the final notice, an LT11 or Letter 1058, which gives you 30 days (IRS.gov, 2026) to request a Collection Due Process hearing. After that, the IRS goes where the money is:

• Payments from agencies, clinics and practices. The IRS lists accounts receivable and commissions among property it can levy, and a levy served on a payer redirects what it owes you. How these levies work and how to get one released is in IRS levies on 1099 income.
• Medicare payments to providers. If you bill Medicare as a provider or supplier, the Federal Payment Levy Program can take up to 100 percent of those payments, under IRC 6331(h)(3). The IRS says this rate applies in the program from October 23, 2015. Other federal payments are generally levied at up to 15% (IRS.gov, 2026), and payments to federal contractors and vendors at up to 100 percent. The final notice for these levies is a CP90 or CP297. See federal payment levies.
• Your bank account. Publication 594 says the bank holds levied funds for 21 days (IRS.gov, 2026) before sending them; see the 21-day window.

The IRS’s FPLP page lists the ways to stop or avoid the levy: pay the balance, enter an installment agreement or propose an offer in compromise. It also tells taxpayers not to contact the Bureau of the Fiscal Service or other federal agencies about it; call the IRS number on the notice.

Payment options that fit contract clinicians

While an approved plan runs and you filed on time, the failure-to-pay penalty drops to 0.25% (IRS.gov, 2026) a month. Interest continues at the federal short-term rate plus 3 percentage points, reset quarterly (7% (IRS.gov, Jul-Dec 2026) this quarter). A pending installment agreement request generally stops new levies while the IRS reviews it (IRC 6331(k)); for other ways to buy time, see how to pause IRS collection. Plans are compared on the Fresh Start payment plans page.

Example: a locum nurse practitioner's first 1099 year

The plan covers 2026 only. Jordan also starts 2027 estimated payments with the first quarter, because a new unpaid balance can put the plan at risk of default.

Records to gather and your next step

1. Every contract with an agency, facility or practice, showing how you are paid.
2. All Forms 1099-NEC, 1099-MISC and W-2 for the year, plus your own payment log by payer.
3. Assignment records: dates, locations and proof of where you keep your home.
4. Expense records: licenses, certifications, continuing education, malpractice cover, travel and mileage logs.
5. All IRS notices and your Online Account balance or transcripts.

A single-year balance under the Simple Payment Plan limit is usually a do-it-yourself fix: file, pay what you can and apply through the IRS Online Payment Agreement. Free help is available from the Taxpayer Advocate Service and Low Income Taxpayer Clinics. A professional helps more when several years are unfiled, a levy has reached your Medicare or agency payments, or classification is in dispute; see do you need a tax professional. Global Gate Tax Relief offers a free consultation and quotes a flat fee upfront if it takes the case. Request a free case review or call 1-877-800-8180.

Frequently asked questions

Keep reading in the Tax Liability Guide

• Owe taxes after a 1099 year?Self-employment tax, filing on time and estimates.
• IRS levies on 1099 incomeHow the IRS reaches money payers owe you.
• Federal payment leviesSocial Security, federal salaries and vendor payments.
• Audits of self-employed peopleWhat the IRS checks and the records that hold up.
• Relief by balance sizeWhich plan fits what you owe.
• Do you need a tax professional?When you can handle it yourself.