1099 Physician Taxes (2026): Quarterly Estimates, Self-Employment Tax, Solo 401(k), S-Corp, and QBI

A growing share of physician income arrives on a Form 1099: locum tenens shifts, moonlighting paid as a contractor, expert witness and consulting fees, honoraria, and newer work like medical AI training. Nobody withholds tax from those payments, so the physician acts as both employee and employer. You owe income tax plus self-employment tax, and you are expected to pay as you go.

This guide covers the rules that matter for physicians in 2026, from IRS forms, publications, and regulations: estimated payments and penalties, how self-employment tax interacts with a W-2 job, retirement accounts, when an S corporation is worth it, the qualified business income deduction, deductions, other states, and PSLF. Two worked examples show the numbers for an employed physician with side income and a full-time locums physician.

No 1099 does not mean no tax. The 2025 tax law raised the threshold for businesses to file Form 1099-NEC from $600 to $2,000 for payments made after December 31, 2025 (P.L. 119-21, section 70433), so smaller gigs may not come with a form. The IRS says taxpayers must report all income either way.

You generally have to make estimated payments if you expect to owe at least $1,000 for 2026 after withholding and credits (Form 1040-ES). The payments cover both income tax and self-employment tax.

The safe harbors. You avoid an underpayment penalty if your withholding and timely estimated payments add up to the smaller of 90% of your 2026 tax or 100% of your 2025 tax. If your 2025 adjusted gross income was over $150,000 ($75,000 if married filing separately), the prior-year figure becomes 110% (Form 1040-ES). Most attendings are in that group. Paying 110% of last year's tax in four equal installments is the simplest way to be safe when your 1099 income is hard to predict.

The withholding shortcut for physicians with a W-2 job. Federal tax withheld from your paychecks counts as paid one-fourth on each due date unless you show otherwise (Form 2210 instructions). So a physician who picks up 1099 work midyear can raise the withholding at the day job, even in December, instead of sending estimated payments, and the extra withholding is treated as if it had been paid on time all year. Our tax withholding calculator can help you size the change.

Self-employment tax is the self-employed version of Social Security and Medicare: 12.4% for Social Security and 2.9% for Medicare, owed when your net earnings from self-employment are $400 or more (IRS Topic 554). On Schedule SE, it applies to 92.35% of your 1099 profit, and you deduct half of it on your return.

The part most physicians miss. The 12.4% Social Security portion only applies up to the wage base, which is $184,500 for 2026 (IRS Publication 15), and Schedule SE counts your W-2 Social Security wages against that limit first. An employed physician whose W-2 Social Security wages are already $184,500 or more owes no Social Security tax on 1099 income at all, only the 2.9% Medicare portion. A resident moonlighting on a 1099 is in the opposite position and owes the full 15.3%.

Additional Medicare Tax. A further 0.9% applies once your Medicare wages and self-employment income combined pass $200,000 for single filers, $250,000 for married couples filing jointly, or $125,000 if married filing separately (IRS). These thresholds are not indexed for inflation, and the 0.9% is not part of the half you deduct (26 U.S.C. 164(f)).

Example A is an employed physician, single, with $300,000 of W-2 wages and $60,000 of profit from weekend locums. Example B is a single physician working full-time locums with $350,000 of profit and no W-2 job. Both use 2026 figures.

Physician A pays $2,106 in self-employment and Additional Medicare tax on $60,000, about 3.5%, because the W-2 already covered Social Security. A's taxable income sits in the 35% federal bracket, which for single filers runs from $256,225 to $640,600 in 2026 (Rev. Proc. 2025-32), so the $11,839 solo 401(k) contribution cuts federal income tax by about $4,144. Physician B pays $33,361, about 9.5% of profit, and can shelter the full $72,000 in a solo 401(k).

Both let your business contribute up to 20% of net self-employment earnings, figured after the deduction for half of self-employment tax (IRS Publication 560). For most physicians the solo 401(k) is the better account, for three reasons.

• It allows employee deferrals. A solo 401(k) takes up to $24,500 in 2026 as an employee deferral on top of the employer contribution, which is how Physician B reaches $72,000. That deferral limit is per person across all your 401(k) and 403(b) plans, so an employed physician who maxes the day job's plan only gets the employer contribution in the solo 401(k). Our contribution limits guide explains which limits stack.
• It keeps a backdoor Roth clean. For the pro-rata rule on Form 8606, traditional IRAs include SEP-IRAs (Form 8606 instructions). A SEP-IRA balance on December 31 makes part of a backdoor Roth conversion taxable. Money in a solo 401(k) doesn't count.
• The deadlines are now forgiving. Since 2023, a sole proprietor with no employees can set up a 401(k) after the year ends, as long as it is adopted by the tax filing deadline (without extensions), and first-year employee deferrals can be paid in by that date too (Pub. 560).

One administrative item: a one-participant 401(k) generally has to file Form 5500-EZ once it holds $250,000 or more at the end of a year (IRS).

An S corporation pays you a salary, which carries payroll taxes, and passes the remaining profit to you as distributions, which don't. The IRS requires the corporation to pay you reasonable compensation for your services before it makes non-wage distributions. To be taxed as an S corporation for a calendar year, you file Form 2553 no more than 2 months and 15 days after the year begins, which is March 15 (Form 2553 instructions).

For an employed physician with side income, it usually costs more. Take Physician A and suppose the S corporation pays a $30,000 salary out of the $60,000 profit:

• The corporation owes the 7.65% employer share of Social Security and Medicare on the salary, $2,295. Its 6.2% Social Security part stays paid even though A's W-2 job already covered the wage base. Only the employee's excess Social Security withholding comes back, as a credit on your return when you had more than one employer (IRS Topic 608).
• With the employee's 1.45% Medicare and the 0.9% Additional Medicare Tax, payroll taxes total about $3,000, against $2,106 as a sole proprietor. The S corporation's larger deduction gives back roughly $500 at a 35% rate, so A ends up a few hundred dollars worse off before paying for payroll processing and a separate corporate return.
• The employer contribution to a solo 401(k) is then based on the $30,000 salary, 25% or $7,500, instead of $11,839.

For a full-time 1099 physician, it can be worth modeling. Every dollar paid as a distribution instead of salary avoids 2.9% Medicare tax (3.8% once you are over the Additional Medicare Tax threshold), and it also avoids 12.4% Social Security tax if your salary would otherwise be below the wage base. Against that, count the cost of payroll, a separate return, and any state fees, and remember that a lower salary also lowers the solo 401(k) employer contribution. How much salary is reasonable depends on what you would pay someone else to do your work, and that question decides the math. Try our S-corp tax savings calculator, then confirm with a CPA before filing Form 2553.

The qualified business income deduction lets owners of pass-through businesses deduct up to 20% of their qualified business income. Physicians get less of it than most business owners because medical services by physicians are a specified service trade or business, and for those the deduction phases out as taxable income rises. For 2026 (Rev. Proc. 2025-32):

• Single filers: the full deduction below $201,750 of taxable income, a partial deduction up to $276,750, and none above that.
• Married filing jointly: full below $403,500, partial up to $553,500, none above.
• A new floor: starting in 2026, the law adds a minimum deduction of $400 for taxpayers with at least $1,000 of qualified business income.

Qualified business income is reduced by the deductible half of self-employment tax, self-employed health insurance, and retirement plan contributions tied to the business (IRS). That cuts both ways. Physician A is far above the range and gets nothing. Physician B, after a $72,000 solo 401(k) contribution and the standard deduction, lands near $246,000 of taxable income, inside the single phase-in range, so a partial deduction comes back. The exact amount runs through Form 8995-A and its wage limits, so let your software or CPA compute it.

A business expense is deductible if it is ordinary and necessary: common in your field and helpful to the business (IRS Publication 334). For a 1099 physician that typically means expenses tied to the contract work itself, such as licenses and credentialing for the states you work in. A few rules come up often:

• Mileage. The IRS business rate is 72.5 cents a mile for January through June 2026 and 76 cents for July through December 2026 (IRS).
• Home office. The space must be used regularly and exclusively as your principal place of business, which can include administrative work such as billing and scheduling (Pub. 587). The simplified method allows $5 per square foot, up to 300 square feet (IRS).
• Health insurance. Self-employed health insurance premiums are deductible on Form 7206, limited to your business's net profit, but not for any month you were eligible for a subsidized employer plan, including your spouse's, even if you didn't enroll (Form 7206 instructions). Most employed physicians with side income can't take it.

Locums in other states. States generally tax nonresidents on income earned from work done inside their borders. California, for example, taxes nonresidents on income from services they physically performed in the state (California Franchise Tax Board). Expect to file a nonresident return in each state with an income tax where you worked, and check whether your home state gives a credit for tax paid to the others. Our locum tenens take-home guide works through the numbers.

PSLF counts payments made while you are employed full time by a qualifying employer, so 1099 work generally doesn't count, and a W-2 job at a for-profit locums agency doesn't either. The regulation has one exception that matters for physicians. It treats as employed someone "who works as a contracted employee for a qualifying employer in a position or providing services which, under applicable State law, cannot be filled or provided by a direct employee of the qualifying employer" (34 CFR 685.219(b)). In states that bar hospitals from employing physicians directly, a contracted physician at a nonprofit or public hospital may qualify; our California professional corporation guide covers one such state. The qualifying employer still has to certify your employment. See our PSLF guide for the rest of the rules.

• By December 31, 2026: if you have a W-2 job, adjust your withholding to cover your 1099 income for the year.
• January 15, 2027: fourth 2026 estimated payment, unless you file and pay in full by February 1.
• March 15, 2027: Form 2553 deadline for an S election effective for 2027.
• April 15, 2027: 2026 return due, the last day to adopt a new solo 401(k) for 2026 and to pay in first-year employee deferrals, and the first 2027 estimated payment. Employer contributions can wait until the return's due date including extensions (Pub. 560).

For more on what the 2025 tax law changed, see what the One Big Beautiful Bill changed for physicians, and for side income options, our physician side income guide and resident moonlighting guide.