1099 therapist taxes basics: What to Track
- Ryan Burns
- 3 days ago
- 6 min read
1099 work can be freeing, but it also means you’re the one keeping the paper trail. The goal isn’t to learn every rule. It’s to track a few key things consistently so you can understand your income, your costs, and your cash flow.
In this article, you’ll learn:
What changes (practically) when you move from W-2 to 1099
A weekly “good enough” system for tracking income, expenses, mileage, and admin time
Common therapist expenses people forget
When it’s time to ask a pro
💡 Key takeaway: Getting organized beats getting perfect. A small weekly habit prevents big year-end surprises.
First: This Is Education, Not Tax Advice
This post is general education for therapists. Tax rules are personal, change over time, and depend on your state, entity type, and income mix. Use this as a “what to track” checklist, then confirm specifics with a qualified professional.
When it’s worth talking to a CPA
A CPA (or enrolled agent) is especially worth it when you’re new to 1099 work, mixing W-2 + 1099 income, practicing across state lines (common with telehealth), changing business structure, or you’ve had underpayment penalties or surprise bills [4].
Why “getting organized” matters more than knowing every rule
The IRS focuses on whether your records clearly show income and expenses and whether your books summarize business transactions [5]. The exact app matters less than consistency.
✅ Key takeaway: If you can answer “What did I earn?” and “What did I spend?” each month, you’re already ahead.
The 3 Things That Change When You’re 1099
Being a contractor doesn’t mean you “avoid taxes.” It means you’re responsible for tracking and paying them differently. Consider this your independent contractor therapist basics refresher focused on tracking, not rules.
You track income differently
You might receive a Form 1099-NEC from a payer, but you still must report all income, even if you don’t receive a 1099 [1][2]. So your tracking system should be based on deposits and payment reports, not just tax forms.
Common misconception: “No 1099 = no need to report it.” Track all work-related deposits anyway [1].
You plan for taxes differently
Taxes are pay-as-you-go. When you’re self-employed, there isn’t an employer withholding from each check, and many people need estimated tax payments [4].
Common misconception: “I’ll just pay whatever I owe at filing time.” That’s how many therapists end up surprised in April [4].
💡 Key takeaway: The point of estimated taxes isn’t complicated math. It’s avoiding a cash-flow shock.
You treat your practice like a small business (in a manageable way)
The IRS generally expects self-employed people to file if net earnings from self-employment were $400 or more [3]. Even if you’re part-time, you’ll feel better with “small business basics” in place.
What to Track Weekly (Simple System)
Aim for 15 minutes once a week. This is 1099 income tracking you can actually keep up with.
Income (by payer/client type)
Record:
Total deposits for the week
Source (insurance, private pay, EAP, platform, group practice, etc.)
Outstanding invoices/notes
Quick example: One spreadsheet tab with Date, Amount, Source, Notes. Save weekly platform payout reports as PDFs.
Expenses (with categories you’ll actually use)
Start with 6–8 categories you’ll actually remember:
Clinical tools
Admin/software
Education/CE
Professional fees
Office/telehealth
Travel/mileage
Marketing
Banking/processing fees
🧾 Key takeaway: If you don’t categorize now, you’ll be guessing later.
Time/admin load (so you can price your work realistically)
Track unpaid time for notes, emails, documentation, billing headaches, and cancellations. If admin time is a big percentage of your week, it changes how you price and schedule.
Example: For two weeks, jot “Client hours” vs “Admin hours.” Even rough data is useful.
Common Expense Categories Therapists Forget
Software/tools, CE/training, consults
Often-missed items (business expenses therapist 1099 contractors forget to log):
EHR/telehealth subscriptions and add-ons
Continuing education, conferences, exam prep
Consultation groups or peer consult fees
Books, workbooks, assessment materials
The IRS emphasizes keeping supporting documents for purchases and other transactions so you can record them properly [5].
Common misconception: “My bank statement is my receipt.” Statements help, but receipts and supporting docs make categorizing and substantiating expenses much easier [5].
Home office and telehealth setup basics
If you work from home, there may be home-office considerations. The IRS has a simplified home office option based on square footage (up to 300 sq ft) [7]. Whether you qualify depends on how you use the space, so this is a classic “ask a pro” area.
Also track home-based telehealth setup costs: internet upgrades, headset/webcam, lighting, and security tools.
💡 Key takeaway: Telehealth isn’t “free overhead.” Track the real costs of delivering care from home.
Professional fees, licensure, insurance
These get missed because they’re annual:
Licensure renewals
Liability/malpractice insurance
Professional memberships
Credentialing fees
A “Good Enough” Bookkeeping Workflow
This bookkeeping for therapists approach is intentionally simple: separate, categorize, review.
Separate account/card (why it reduces stress)
One of the simplest upgrades: keep business spending separate. It makes it easier to see profit/loss, download clean statements, and find receipts.
✅ Key takeaway: Separation turns “Where did my money go?” into a five-minute answer.
Monthly review ritual (30 minutes, not a weekend)
Once a month:
Match deposits to payment reports
Categorize new expenses and attach receipts
Keep a running “questions for my CPA” note
A short ritual supports the IRS expectation that your records summarize transactions and clearly show income/expenses [5].
What documents to keep and how to store them
Keep payment reports, invoices, receipts, contracts, 1099s, and mileage logs (therapist mileage tracking matters most when you document as you go). The IRS generally says to keep records that support income/deductions until the statute of limitations runs out, and the time period depends on the item [6].
Simple storage: Taxes → 2026 → Income / Expenses / Mileage / Forms (subfolders by month). This folder structure becomes your self-employed therapist checklist when you’re tired and busy.
Estimated Taxes: The Concept, Not the Math
If you’ve ever searched “estimated taxes 1099 therapist,” start here: it’s about building a habit, not doing perfect math.
Why people get surprised
The surprise usually comes from: no withholding, income swings, and the fact that self-employed people may owe self-employment tax in addition to income tax [3]. The IRS notes you can owe penalties if you don’t pay enough during the year through withholding or estimated payments [4].
A plain-language “set-aside” habit
Create a habit, not a spreadsheet marathon:
After each payout, move a percentage into a separate “tax set-aside” account.
Revisit the percentage quarterly with a pro as income changes.
💡 Key takeaway: A set-aside habit is a cash-flow system, not a tax strategy.
Red flags that mean “ask a pro”
Ask for help if you’re unsure whether you need estimated payments, your income is growing fast, you work across state lines, or your situation got more complex (new entity, mixed income, big equipment purchases) [4].
If you’re a 1099 telehealth therapist Tennessee clinicians should remember that state rules still matter, even if your clients are across state lines. For example, Tennessee’s Hall income tax (on certain interest/dividend income) was repealed for tax periods beginning January 1, 2021 [8].
How a Practice Platform Can Reduce 1099 Chaos
Admin support + payment workflows
A strong platform can reduce chaos by standardizing billing and payment workflows, creating predictable payout schedules, and reducing time spent chasing money.
If you’re looking for a psychologist-led telehealth environment with specialized services, explore ScienceWorks Behavioral Healthcare and meet the ScienceWorks team.
Clear compensation model and predictable reporting
Before you sign anything, look for a compensation model you can understand, and reporting you can export monthly. Clean reporting matters even more if you offer mixed services like therapy, assessment options, or groups.
If you want 1099 autonomy with strong systems behind you
If you want the flexibility of 1099 work without the “everything is on me” feeling, look for a practice environment that treats systems as part of clinician wellness. Visit: scienceworkshealth.com/careers
References
Internal Revenue Service. Manage taxes for your gig work. IRS website. Available from: https://www.irs.gov/businesses/small-businesses-self-employed/manage-taxes-for-your-gig-work. Accessed 2026-02-02.
Internal Revenue Service. Form 1099-NEC and independent contractors. IRS website. Available from: https://www.irs.gov/faqs/small-business-self-employed-other-business/form-1099-nec-and-independent-contractors. Accessed 2026-02-02.
Internal Revenue Service. Self-employed individuals tax center. IRS website. Available from: https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center. Accessed 2026-02-02.
Internal Revenue Service. Estimated taxes. IRS website. Available from: https://www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes. Accessed 2026-02-02.
Internal Revenue Service. What kind of records should I keep. IRS website. Available from: https://www.irs.gov/businesses/small-businesses-self-employed/what-kind-of-records-should-i-keep. Accessed 2026-02-02.
Internal Revenue Service. How long should I keep records. IRS website. Available from: https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records. Accessed 2026-02-02.
Internal Revenue Service. Simplified option for home office deduction. IRS website. Available from: https://www.irs.gov/businesses/small-businesses-self-employed/simplified-option-for-home-office-deduction. Accessed 2026-02-02.
Tennessee Department of Revenue. Hall income tax. TN.gov. Available from: https://www.tn.gov/revenue/taxes/hall-income-tax.html. Accessed 2026-02-02.
Final disclaimer: This content is for informational purposes only and is not intended as tax, legal, or financial advice. Always consult a qualified professional about your specific situation.
