In 2021, being a self-employed therapist or mental healthcare professional shouldn’t have to feel difficult or confusing. That said, there are so many forms to keep track of come tax season, and self-employment can add an entirely new layer of confusion to that. Many therapists are self-employed and work as independent contractors, and it’s possible to do so with a brief and succinct understanding of what the tax implications of this are.
Contractors are primarily self-employed, and might additionally identify themselves as freelancers or sole proprietors. For example, in the mental healthcare industry, this may look like a therapist who is self-employed but contracted to a group practice. If you’re currently working in a contract role, two IRS forms to become familiar with are the W9 and the 1099.
A W-9 is a single page form submitted to the IRS, also titled and known as a “Request for Taxpayer Information and Certification”. As a therapist, you are required to fill out a W-9 if you are a non-employee doing more than $600 of work for a business in a given year. It is a form for individuals only. If you are, say, a practice owner who is contracting other therapists for your business, you will need to request a completed W-9 from each contractor you hire.
Meanwhile, a 1099 form often works in tandem with the W-9. A 1099-MISC form is known as an "information filing" form. 1099s are usually distributed by the end of January in any given tax year. You'll typically receive a 1099 in the mail if you received some kind of payment outside of your typical income, salary, or tips; this could be through working as an independent contractor, but can also come from selling stock or receiving interest or dividend income.
You do not need a 1099 to file your tax return, as long as you have the correct information on file from your own practice and caseload management. The forms are sent to you so you know how much money to report, but do not need to be attached to your return. Copies of the form are sent to the IRS by the issuer, so your statement can be double-checked.
The one exception to the above is the 1099-R, which tracks distributions from retirement plans and insurance contracts. If income tax was withheld, you will need to submit the 1099-R with your tax return.
Looking through these forms ahead of tax season can be enormously beneficial and alleviate some of the stress that comes with filing taxes as a self-employed therapist. Being self-employed has incredible benefits––to those in mental healthcare, that means flexibility in hours and the ability to run and maintain your own business––but the paperwork can pile up a bit. Don’t let that deter you––we’re here to help.
Stay tuned for more tips throughout tax season!
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post.