Ways to Pay Tax on Your Locums Income

by | | Taxes

When you work locums, you’re self employed and nobody is withholding taxes for you. The question is, how and when do you make your locum tenens tax payments? Read on to find out.

Ways To Pay Tax On Your Locums Income

There are three ways to pay tax on your locums income: make estimated tax payments, withhold more tax at W-2 jobs, and just owe on April 15th. Estimated tax payments are the most common.

Make Estimated Tax Payments

If you have a decent amount of locums income, you’ll most likely make quarterly estimated tax payments. Here is when and how.

Due Dates

The due dates for estimated tax payments are below.

Due Date

For Period

April 15

Jan-Mar (3 mos)

June 15

Apr-May (2 mos)

September 15

Jun-Aug (3 mos)

January 15

Sep-Dec (4 mos)

How To Pay

There are two ways to pay estimated taxes: by mail or online. By mail is still more common, but online is more efficient and secure.

To pay by mail, you send in a check along with a payment coupon (Form 1040-ES). Your tax preparer or DIY tax software will generate Form 1040-ES for you.

We’re big fans of paying online. As of this writing, the URL is www.irs.gov/etpay. You can pay from your bank account, or with a debit or credit card. Perhaps the best feature is that you can schedule payments for a future date. If you know how much you want to pay for several future quarters, you can schedule it all at once and be done.

Two tips for paying online:

  • If you file taxes jointly, use the Social Security number of the person who is listed first on your tax returns. This ensures that the IRS will credit you properly for the payment.
  • You can modify or cancel a scheduled payment until two business days before the payment date. Ideally you won’t make any changes; if you do, don’t wait until the last minute.

Withhold More At W-2 Jobs

Another way to pay tax on your locums income is to withhold more tax at a W-2 job (yours or your spouse’s). Below, we discuss the benefits of this approach, when it works best, and how to do it.

Benefits Of Withholding More

Withholding more at your W-2 job is underrated. It has two key benefits:

  • Skip dealing with estimated tax payments, saving you valuable time.
  • Know that all your locums income is yours to keep, because the tax is covered already.

When Withholding More Works Best

Withholding more at your W-2 job works best when you do a modest amount of locums on the side. Since the locums tax isn’t huge, you’ll still have a decent W-2 take-home paycheck, even after increasing your withholding.

This concept matters most if you’re asking your spouse to withhold more at their W-2 job. Many spouses aren’t thrilled to have their take-home pay drop like a rock, even if it’s all going to the same place in the end!

How To Withhold More

You withhold more by making new withholding elections. Bottom line: Talk to HR at your W-2 job if you need help.

HR may ask you to fill out a new Form W-4 to change your elections. This form is so complex that the only result of filling it out is having zero confidence that your desired amount will be withheld!

Pro tip: Look at your current withholding and add a flat dollar amount. This is the only way to get your desired result the first time around. Say your current withholding is $1,000 per paycheck, and you want to go to $1,500. Tell HR to withhold an extra $500 per check. If you have to fill out Form W-4, line 4(c) lets you write in the extra amount you want.

Owe On April 15th

Whatever you didn’t pay with estimated taxes or W-2 withholding, you’ll owe on April 15th. That’s OK as long as you know what to expect.

You were supposed to pay taxes on your locums income throughout the year. If you underpaid, you may have a penalty added to your tax return. This sounds worse than it is, but it’s best to avoid a penalty if you can.

To learn more about locum tenens taxes, check out our complete guide.

Want a no-obligation review of your finances? Request a FREE Financial Pulse Assessment™ online. We’ll review your scorecard and send you a short video, including comments on your Tax Rate and how to reduce it. No need to talk with anyone unless you want to.

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