How Much Are You Really Making from Your per Diem Shift?
No matter your profession, tax time is a time that we all hope we have had our withholding set to the best selections (on the W-4) or have set aside enough money from “non-employment income” throughout the past year. Why? So we’re not stuck with an unexpected tax bill due when we file our return. This blog will offer a brief overview of the tax consequences of per diem shifts, so you can better plan for your financial future.
Why take per diem shifts?
In our previous blogs, we have examined some of the benefits of taking per-diem shifts. These include greater flexibility, growing experience in your preferred specialties, and earning the most income possible at your skill level. Another important thing to consider when choosing the right fit for your situation is how you are paid. Understanding the differences how you are taxed on the money you make is crucial to understanding exactly how much you are really “taking home.”
How do health care providers get paid for their per diem shifts?
In general, a health care provider who earns per diem shift income can work in 2 ways. They can be hired as an independent contractor who receives a form 1099, or as an employee who receives a form W-2 from their organization annually.
Let’s take a quick look at how take-home pay compares in these two situations.
|Employment Taxes (ie. Social Security, Medicare, etc.)
|The employer pays the government for applicable federal and state employment taxes on behalf of the employee. These are the amounts employees see deducted on a pay stub.
|This cost is not subtracted from their pay at the time, but is reported on the form 1099 they receive at the end of the tax year, and will be due when filing income taxes.
|Form W-4 determines the amount of tax withheld by the employer, which will determine, based on the individual circumstances, how much income tax is due or refunded at filing time.
|Income taxes due are determined by the form 1099, and the amount to cover them will be the contractor’s responsibility to save throughout the year (or pay in quarterly estimated taxes) to avoid a large income tax bill.
We hope that these tips help you better understand your options for making the most of your per diem shift income. This post has been published for informational purposes only, not with the intention to provide tax, legal or accounting advice. If you have tax-specific questions, a licensed tax professional is the best source of information.
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