First Year as a 1099? Here's What You're Missing (And What Actually Changed)

You finished your shift, got paid differently, and suddenly everyone's telling you to "set up an LLC" and "find a CPA."

Cool. But what does that actually mean for you right now?

Let me break down what changed the day you signed that 1099 contract—and what you need to handle before tax season makes you regret putting this off.

You're Not an Employee Anymore (Even Though It Feels The Same)

Here's the thing nobody tells you: You became a business owner the second you signed that 1099 contract. Not "kinda sorta." Not "technically." You RUN a business now.

The hospital you contract with? They're your CLIENT, not your employer.

That means:

• ❌ No one's withholding your taxes

• ❌ No employer match on retirement

• ❌ No health insurance unless you buy it

• ❌ No one's paying "their half" of payroll taxes

You're now paying BOTH halves. That's an extra 7.65% on top of your regular tax rate.

What Actually Changed (The Stuff That Hits Your Bank Account)

1. Your Paycheck Is Lying To You

That $15,000 you got paid last month? That's NOT your take-home.

Here's the math nobody wants to do:

• Federal taxes: ~35% ($5,250)

• State taxes: ~5% ($750)

• Self-employment tax: 15.3% ($2,295)

• What's actually yours: ~$6,700

Set aside 30-35% of EVERY payment for taxes. Use a separate account. This isn't optional.

2. You're Responsible For Quarterly Taxes Now

Remember April 15th being tax day? Cute. Now you have FOUR tax days:

• April 15

• June 15

• September 15

• January 15

Miss these? The IRS charges penalties. And no, "I didn't know" isn't a valid excuse.

Safe harbor rule: Pay 110% of last year's tax bill (divided by 4) and you won't get penalized, even if you underpay.

3. Everything You Spend On Work Might Be Deductible (But Probably Isn't What You Think)

Forums love talking about "write-offs." Here's what actually counts:

YES, deductible:

• CME courses and travel

• Medical licenses and DEA registration

• Malpractice insurance (if you pay it)

• Home office (if it's EXCLUSIVELY for admin work)

• Mileage between work sites (NOT your commute)

• Professional dues and subscriptions

NO, not deductible:

• Your regular commute to the hospital

• That $200 dinner you had "while thinking about work"

• Your entire cell phone bill (unless it's 100% business)

• Clothes, even if you only wear them to work

Track EVERYTHING. Use QuickBooks, use a spreadsheet, hell, use a notebook. But track it.

4. You Need To Set Up Actual Business Infrastructure

This isn't "nice to have." This is "the IRS will come for you" territory.

Minimum setup (like, this week):

• ✅ Get an EIN (free, takes 10 minutes online)

• ✅ Open a separate business bank account

• ✅ Get one credit card for ONLY business expenses

• ✅ Start tracking every business transaction

Don't co-mingle funds. Your personal Visa and business expenses in the same account? That's an audit waiting to happen.

5. Solo 401(k) > SEP-IRA (Yes, Really)

Everyone screams "SEP-IRA!" because it's simple. But you're leaving money on the table.

Solo 401(k) advantages:

• Max out at $190K income vs. $285K for SEP-IRA

• Keeps your backdoor Roth IRA option open (pro-rata rule)

• More contribution flexibility

You need to open it by December 31st, but you can fund it until tax filing deadline.

6. Health Insurance Costs More Than You Think

$300/month for a bare-bones plan if you're single and healthy. $3,000/month for family coverage that's actually decent.

Check:

• Professional associations (sometimes have group rates)

• Spouse's plan (if they're W-2)

• Healthcare.gov (though you probably won't qualify for subsidies)

If you get a High Deductible Health Plan, open an HSA. It's a triple tax advantage—which is accountant-speak for "free money."

7. That LLC Everyone Told You To Get? Maybe Not Yet.

Forums LOVE LLCs. "Asset protection!" "Tax savings!" "Professional!"

Real talk: As a sole proprietor 1099 doc, an LLC probably doesn't help you much.

LLC does NOT:

• ❌ Protect you from malpractice (that's always personal)

• ❌ Save you taxes (no tax difference from sole proprietor)

• ❌ Make you look more legitimate to hospitals

S-Corp MIGHT save you taxes IF:

• ✅ You're profiting $100K+ annually

• ✅ You're willing to deal with payroll complexity

• ✅ The Medicare tax savings exceed accounting costs (~$2-3K/year)

Most 1099 docs starting out? Stay sole proprietor for year one. Keep it simple.

What You Should Actually Do This Week

Stop reading forums. Stop asking your friend's uncle who "knows about taxes."

Here's your action list:

This Week:

1. Open a separate bank account for business

2. Get an EIN from IRS.gov (takes 10 minutes)

3. Calculate 30% of your last payment and move it to savings for taxes

4. Set up QuickBooks or start a tracking spreadsheet

This Month:

1. Figure out your quarterly tax payment (or find someone to help)

2. Research health insurance options

3. Calculate how much you need for Q1 estimated taxes

Before Year-End:

1. Open Solo 401(k) if you want to contribute for this year

2. Review all business expenses and make sure they're documented

3. Consider whether you need a CPA for tax filing

The Bottom Line

Being 1099 isn't just "getting paid differently." You're running a business whether you feel like it or not.

The good news? Once you have systems in place, it's actually not that complicated. You just need to stop treating this like you're still W-2.

You make more as 1099. But you're also responsible for everything an employer used to handle. Fair trade? Only if you actually handle it.

Need help getting your 1099 financial foundation set up right?

Join the Financial Anatomy Lab: 1099 Edition—a community built specifically for medical professionals navigating independent contractor life. We break down the business side of healthcare so you can focus on the clinical side.