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    Nursa Staff

    Managing Your Taxes as a PRN Nurse

     

    Once nurses get a taste of the flexibility and the financial potential that come with PRN work, they rarely want to go back to staff positions. Nevertheless, PRN workers must remember that handling finances as self-employed individuals is very different from managing finances as employees.

    If you’re just getting started with PRN work – especially if you are working PRN full time – expect to undergo a learning curve regarding managing your finances. It might take a couple of months to nail just how many shifts you need to pick up to cover your monthly expenses, including expenses you likely had not contemplated before, such as self-employment tax and health insurance.     

    Perhaps the biggest financial change you will experience as your own boss will be related to taxes – how much to pay, when to pay, what you can deduct, and, most importantly, how to save up for paying taxes. Although hiring a Certified Public Accountant (CPA) or a licensed tax preparer is highly recommended to give you peace of mind and to guarantee that you are taking advantage of all possible tax deductions, it is always beneficial to have at least a basic idea of your personal bookkeeping and tax responsibilities – and it is essential to have a strategy in place to help you be prepared for tax time.

    Understand Self-Employment Tax Basics

    Firstly – and let’s be very clear about this – even if you pick up a single PRN shift in the entire year, it is very likely that you will need to pay self-employment tax. If you carry out any work for a company or an individual without being an employee, then you are responsible for paying self-employment taxes on that income. 

    The best place to go to understand your tax responsibility is to go directly to the IRS itself. This article from IRS.gov is a great starting point.

    Pay Estimated Taxes on Time

    In order to avoid penalties for not paying estimated taxes or for paying late, set reminders on your phone for both when taxes are due and for when you need to reach out to an accountant to help you file. 

    Although there are many possible methods for paying your taxes, including via snail mail or by phone, we recommend that you take advantage of the conveniences that modern technology offers and pay online. 

    Don’t Overlook These Tax Deductions

    Knowledge is power – and it’s also money you can save on taxes. Did you know that if you are self-employed, you can deduct the employer-equivalent portion of your self-employment tax in figuring your adjusted gross income? However, keep in mind that this deduction only reduces your income tax. Furthermore, when you are self-employed, you can deduct your health insurance for income tax purposes as well. 

    Tips for Staying on Top of Your Taxes 

    Now that you know how much you will have to pay in taxes and when, it is important that you choose and commit to the following strategies that will help you to be prepared to pay your estimated taxes.

    Follow That Money Trail

    First of all, keeping track of your income and expenses is a must, but it’s up to you how you want to do this: 

    • Continue to keep paper records if this is what you feel most comfortable with.
    • Use Google Sheets, which you can access from all your devices.
    • Download an accounting app such as QuickBooks.

    Hire a Professional

    Second, consider hiring a CPA or tax preparer at least during your first year of PRN work or until you become more familiarized with paying self-employment taxes. Alternatively, you can use one of the following free options: 

    • Find out if your local library offers free tax-preparation help. 
    • Get free help online from AARP Foundation Tax-Aide Online Tax Assistance or from USA.gov. 

    Get Rid of Temptation

    One tip that will help to have the money ready – and to not suffer so much from having to give it up – is to not see your estimated tax money as yours in the first place. Here are some strategies that can help you put this idea into practice:

    • Keep a separate bank account – exclusively to save money for taxes – and transfer into it a percentage of each PRN-job payment. Try to start by setting aside 25-30% of each payment (for self-employment and income taxes) until you are able to figure out a more exact percentage based on your income and applicable deductions.
       
    • If transferring a percentage of each payment is too much of a hassle, transfer the same percentage of all your PRN income (after deductions) into your bank account for taxes on a monthly basis. 
       
    • Turn each third or fourth shift into a tax-paying shift. Deposit this payment into your special bank account for taxes in its entirety or make an immediate direct deposit to the IRS in that amount. Again, once you have a better idea of how much you will owe, you will be able to adjust how many shift-payments you’ll need to set aside.

    These strategies won’t give you the exact amount you will need for taxes, but following any of them will make sure that the bulk of what you owe is either paid or standing ready. Furthermore, after a month or two, you will be able to tweak the strategies to fit your particular financial situation.   

    What strategies do you use to help you plan for tax season? Drop them in the comments below.

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