Many therapists work on a part-time, contractual basis for group practices, mental health startups, and employee assistance programs (EAPs).
If that sounds like you, it’s up to you to file and pay taxes on the income you earn with help from IRS Form 1099-NEC.
Here’s everything you need to know about filing taxes as a 1099 contractor therapist.
Who needs to file taxes for self-employment income?
You are required to report any income you earn as a contractor on your individual tax return, using IRS Form 1040.
Any company (or individual operating as a business) that hires you as a contractor and pays you $600 or more in the course of the year is required by law to submit a Form 1099-NEC.
Even if you do not receive a Form 1099—whether because a company paid you less than $600 during the year, or because they failed to send you one—you must report the income you earned on your tax return, and pay taxes on it.
What is Form 1099?
Form 1099-NEC reports the money a company paid you during the course of the year. When the company fills it out, they create two copies. They send Copy A to the IRS. They send Copy B to you.
If you operate as a corporation—either because you’ve registered as a single-member S corporation, or because you’ve registered as an LLC that files as an S corporation—the company may not be required to send you a Form 1099. Check with your accountant if you’re not sure.
Remember, even if you don’t receive a Form 1099, you are legally obligated to report the income you earned from the company.
Do part-time contractors need to pay quarterly taxes?
If you’re an individual, and you’ll owe over $1,000 in taxes for a particular year, you are required to pay quarterly taxes.
How to calculate federal taxes you owe as a 1099 therapist
In order to calculate the taxes you owe for the year, you’ll first need to figure out what your total taxable income is.
Two ways to do that:
- If you have a bookkeeping system in place (either accounting software you use, or a bookkeeper who works for you), simply generate an annual profit and loss statement covering the tax year in question.
- If you don’t have a bookkeeping system in place, complete Schedule C, Form 1040. You’ll need to enter all the income you’ve earned this year, as well as your deductible expenses. You can use it to calculate your taxable income.
Once you have your taxable income:
- Multiply it by your income tax rate. Your income tax rate is determined by your tax bracket.
Example: Your total taxable income is $50,000, and your tax rate (because of your tax bracket) is 22%. You multiply $50,000 by 0.22 to get $11,000, your total income tax burden for the year.
- Multiply it by the self-employment tax rate. The self-employment tax rate is 15.3%.
Example: You multiply your taxable income of $50,000 by 0.153 to get $7,650.
- Add the results of Step 1 and Step 2 to find the total amount you must pay on your self-employment income.
Example: Add $11,000 (your income tax) to $7,650 (your self-employment tax). Your total federal tax burden is $18,650.
2023 tax deadlines for 1099 therapists
If you’re a 1099 therapist filing your taxes using Form 1040, your tax filing deadlines for the 2022 tax year are as follows.
- February 1st, 2023: Deadline to receive Form 1099-NEC from clients.
- March 15th, 2023: S corporation tax returns (IRS Form 1120-S) and partnership tax returns (IRS Form 1065) are due. This is also your deadline to file for an extension for these entity types.
- April 17th, 2023: Individual tax returns (Form 1040) due. This is also the deadline to file for an extension.
- September 15th, 2023: The final deadline for S corp and partnership tax returns, if you successfully filed for an extension.
- October 16th, 2023: The final tax deadline if your sole proprietorship successfully filed for an extension.
Your quarterly tax deadlines are:
- April 18, 2022: Deadline for Q1 estimated tax payments
- June 15, 2022: Deadline for Q2 estimated tax payments
- September 15, 2022: Deadline for Q3 estimated tax payments
- January 16, 2023: Deadline for Q4 estimated tax payments
How to pay your taxes as a 1099 therapist online
The easiest way to pay your taxes online is to enroll in the Electronic Federal Tax Payment System (EFTPS).
The EFTPS is your online portal for federal tax payments. It allows you to schedule automatic payments, too, reducing your likelihood of missing a tax deadline.
To enroll in EFTPS, you’ll need:
- An Employer Identification Number (EIN)
- A business checking account
You can learn more from the EFTPS website.
In some cases, even if you’re working as a contractor, you may find yourself hiring contractors (or subcontractors) of your own. Then it’s up to you to submit Form 1099s to them as well as the IRS. Learn how to hire independent contractors for your therapy practice.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult their own attorney, business advisor, or tax advisor with respect to matters referenced in this post.
Bryce Warnes is a West Coast writer specializing in small business finances.
Heard partners with third-party tax preparers who are familiar with therapy practices to handle your annual business and personal income taxes from start to finish, including federal and state returns. Schedule a free consult today.Schedule a free consult