Locum tenens work pays well and offers flexibility, but it also changes your tax situation in ways that catch a lot of pharmacists off guard the first time they file. Staffing agencies and health systems classify locum pharmacists differently — some as 1099 independent contractors, others as W-2 temporary employees — and that classification determines who withholds taxes, what you can deduct, and how much you owe when you file. None of this is tax advice; it’s a map of the basic concepts so you know what questions to bring to a qualified tax professional.
1099 vs W-2: the core difference
W-2 status means the staffing agency or facility treats you as an employee. They withhold federal and state income tax, Social Security, and Medicare from each paycheck, and they issue a W-2 at year-end. This is the more familiar setup — taxes are handled automatically, similar to a staff pharmacist role.
1099 status means you’re classified as an independent contractor. The paying entity does not withhold any taxes — you receive the full gross amount and are responsible for calculating and paying your own income tax and self-employment tax. You’ll receive a 1099-NEC at year-end reporting total payments, not a W-2.
Many locum tenens pharmacists work under 1099 arrangements, particularly through staffing agencies, because it gives the agency more flexibility in how it structures assignments. Whether a given assignment is legally structured as 1099 or W-2 depends on the specific facts of the working relationship — not just what the agency calls it — and this is an area where the IRS has specific tests. If you believe you’ve been misclassified, that’s a conversation for a tax professional or employment attorney, not something to resolve on your own.
Why 1099 status changes your tax math
Under 1099 status, you’re generally responsible for self-employment tax in addition to regular income tax. Self-employment tax covers the Social Security and Medicare contributions that an employer would normally split with you — as a contractor, you owe both the employee and employer portions. This is on top of federal and state income tax, and it’s a common source of underpayment surprises for pharmacists new to locum work.
Because no one is withholding taxes from your pay throughout the year, you may need to make quarterly estimated tax payments to the IRS (and potentially your state) rather than paying everything in one lump sum at filing time. Missing or underpaying quarterly estimates can result in penalties even if you pay the full amount owed by the April filing deadline.
Deductible expenses contractors commonly track
Pharmacists working 1099 assignments may be able to deduct certain business-related expenses against their contracting income, which can meaningfully affect what’s owed. Categories locum pharmacists commonly discuss with their tax preparer include:
- Travel between assignments — mileage, airfare, and lodging tied to work locations away from a primary residence
- Licensing and credentialing costs — state license fees, DEA registration, background checks required for a specific assignment
- Professional liability insurance — premiums for coverage carried independently rather than through an employer
- Continuing education — courses, conferences, and materials required to maintain licensure
- Home office or administrative costs — in some circumstances, a portion of costs tied to managing contractor work
Whether a specific expense is actually deductible, and how it should be categorized, depends on your full financial picture and current tax law — this list is a starting point for a conversation with a CPA or tax preparer, not a deduction checklist to apply on your own.
Multi-state complications
Locum tenens work often means working assignments in several different states within the same tax year, which can trigger nonresident state income tax filing obligations in each state where you earned income — separate from wherever you claim residency. Some states have reciprocity agreements that simplify this; many don’t. Pharmacists piecing together assignments across multiple states should expect their tax filing to be more complex than a single-state W-2 pharmacist’s, and should loop in a tax professional familiar with multi-state filing before assignment season gets underway.
This tax complexity sits alongside the licensing and credentialing side of locum work — maintaining active licenses, malpractice coverage, and CE compliance in every state where you accept assignments. Our locum tenens compliance guide covers that side in more detail.
Keep records year-round, not just at tax time
Whatever your classification, the practical habit that makes filing easier is keeping contemporaneous records: a mileage log, receipts for licensing and CE costs, copies of every 1099-NEC or W-2 received, and a running note of which states you worked in and for how long. Reconstructing a year of assignments from memory in March is far harder than logging it as you go.
Bring the details to a professional
Tax classification and deduction rules are governed by IRS regulations and state tax codes that change periodically and apply differently depending on your individual circumstances, business structure, and state of residence. Nothing here should be treated as tax advice for your specific situation — confirm your classification and filing obligations with a licensed CPA or tax professional experienced in contractor and multi-state income.
While you’re getting your tax picture in order, keep your licensing picture equally organized. RxByState tracks renewal deadlines, CE requirements, and license status across every state where you hold an active license, so credential compliance doesn’t slip while you’re focused on assignments. Start a free 14-day trial →