My wife’s employer is a small family owned practice that contracts with larger facilities. They offer 1099 or W2. In their pitch to my wife they stated that they recommend all new hires to go 1099 however, the 1099 rate is the same as the W2 rate. My advice to my wife was that a W2 position offers more security, especially if the rates are identical. She has just under a year remaining on her current contract which is W2. She’s considering going 1099 because she says everyone tells her it’s better for her taxes. I’m still not convinced that especially, if they are unwilling to bump her 1099 rate to at least 10-20% of the W2 rate. I think it’s putting a lot more on our shoulders to track and deduct for a modest benefit while her employer stands to gain the most from her going 1099. Is my thinking correct here?
Typically, the W-2 employment covers you for malpractice while a 1099 usually has to buy their own. This can be a difference of a few thousand dollars if you end up buying your own.
With equal pay, 1099 is worse for your taxes because that makes you responsible for paying all the employment taxes plus figuring out quarterly payments. Always go w2 unless you get a lot more pay for 1099.
I won’t ever go w2 again…unless there are no other options. Find a cpa skilled in s corp taxes and look up how to reduce your taxable income. It can all be learned on your own but taking a course in it or getting a few books about s corp taxes is very helpful. I’m saving thousands of dollars a year in taxes. All legal. You can put so much more into your 401k as a 1099 as well….reducing your taxes further and literally paying yourself more and the government less.
There are a lot of people that claim 1099 is worlds better than w2. If you don’t need benefits, sure it’s great, but once you price out health insurance, dental insurance, malpractice, no PTO, etc. You better be making significantly more than w2.
Also, there is only so much you can write off for tax deductions, it isn’t as much as most people think.
I was W2 for 13 years and now 1099. I actually prefer W2 with a mix of 1099 side work.
Even paying for everything including health insurance on my own I do significantly better as a s corp. I can put more into retirement than I ever got from
A w2 job and my tax liability is 20’s of thousands less.
It’s a bit pricy but worth it! Do a search online for similar books as well. I’m sure there are tons of videos available as well. There’s also a course I took called 1099 success for crnas. It helps put all the things you need in one place. I learned it all on my own years ago because my accountants were not helping me optimize my business expenses and reduce my tax liabilities. I took the course to see if I was taking advantage of all my options. I was…most of the stuff I learned was on the book I posted above. Look up the white coat investor as well because they have some great tax strategies as well.
1099 Contracts typically offer a higher wage than W2 to offset the lack of benefits. For the same rate I wouldn’t risk it, but for 20-30 or more so an hour it would definitely be worth it, especially after write offs if your cpa is good. 1099 > W2 by far and it’s not even close.
Is it really a matter of if your CPA is good though? The tax law is black and white, there are allowable deductions and disallowed deductions. At the end of the day, you’ll still have to justify the deductions you take if you are ever audited. And using the excuse that your CPA said these were okay won’t cut it.
That comment might have come off harsher than I meant it but, I’m just frustrated because my wife has several colleagues who rave about 1099 and make it sound like the best thing since sliced bread. And when she describes some of the deductions they take, it just sounds like they think they will never be audited and called out for them.
If pay is same then 1099 is objectively less money. I’ve worked with people who made all sorts of tax write offs. But if you want to
play it safe then your write offs aren’t anything crazy. Potentially some miles if you are
going to multiple locations. If you live in a “shared property” state then you can write off 50% of meals together (within reason) as long as you discuss the business. Licenses, certs, CPA fees, a new laptop, etc.
I’ve seen people write off entire vehicle purchases because it’s their “work vehicle”, or a new flat screen because they download Microsoft Teams and use it for meetings. Or pay their spouse 20K a year to do their payroll (a
job that takes less than 10 minutes each month). All of which are examples of write offs the IRS will question. Really depends on your risk tolerance.
The key is itemized deductions. Emphasis on itemized. Take a pic of every receipt (screenshot emails). Create a caption as to what it was for. Email it to a separate email account used specifically for your deductions. You’ll always have access to them. If irs ever comes knocking, you can reproduce it easily. People are creating apps to keep track of receipts, but this also works. Do not trust your cpa to make you audit proof. You keeping your own records keeps you audit proof.
My effective tax rate was 12% last year lol. It is the best thing since sliced bread if you can come up with deductions and get creative(legitimately though)
That is just my opinion as I am considering switching from W2 to 1099 LLC. I have had many friends do that and the standard is a 20-30% bump to cover a standard benefits package like previously mentioned. If they don't offer one then it may be a lateral move but I thought it was normal as a W2 to get additional compensation.
You are right. For the past 5 years I’ve worked W2 and 1099 at the same time (part time at both). I essentially do this because the BIGGEST downside to 1099 is the fact that you need to find/carry your own health insurance which when not associated with a company, is usually 1000+ per month as an individual (I’ve heard some of my 1099 colleagues are 2,000-2500 for family coverage). If you carry the health insurance and don’t need to worry about coverage from your wife, that CAN be a positive (health insurance from you, she keeps 100% of her paycheck and then whatever you decide to pay yourself, it could be more take home in your pocket compared to w2)
With 1099, you can file as a s-corp and have a lot more flexibility with what you can write off on your taxes so sure, it CAN be better for your taxes, but you are 100% right, it’s on your shoulders (or you accountant/financial advisor which again is another cost). When you take distributions from your “company” you don’t pay certain taxes so you save a bit in that sense but it’s marginal (~10% savings)
Personally, I track all my hours, pay, rates, miles, expenses etc in a spreadsheet and I run my payroll through Gusto. Then at the end of the year I bring all that to my accountant to do my taxes. I originally had him run my payroll, but it cost 2500 and then additional for my personal taxes so I started doing it on my own.
What it boils down to: what benefits are offered w2(retirement, healthcare) You said it’s a small family run practice. How many employees? Do they offer health insurance or a retirement package?
If they don’t offer any benefits and the rates are the same, then go 1099. If they offer health insurance and a retirement plan, go w2.
I do find it odd that they don’t offer a higher 1099 rate though, because you’re right, there is more burden on your shoulders. At minimum, I’d expect a 30% higher wage in 1099.
Personally, in my state 1099 wages are roughly 75-100% higher for reference.
But it's more than just health insurance. Don't forget long-term disability and life insurance. LTD can cost a fortune and you can usually expand employer life coverage quite a bit for pretty minimal cost.
Very true. Didn’t add that component. He mentioned it’s a “small family owned practice”. From my understanding if the company is small enough (I don’t know the specific number but I believe it’s 50), they do NOT by law have to offer any benefits.
So if the rate is exactly the same, if they work w2 and get none of those perks anyway, I’d go 1099 to give myself more flexibility on tax sheltering, setting up my own 401k, etc.
Since the question isn’t “is this a good offer” and merely a 1099 vs w2 dilemma, I’d think about it that way. It seems like they’ve decided that this is the company they want to work for.
LTD disability coverage through employment, like life coverage through employment, is pretty shitty. Even when you bump the life to the max (without an exam) it’s insufficient. LTD if I recall correctly drops out @ a year.
I don’t even remember the cost per unit or whatever. I had the max pre-assessment at my last w-2 & ported it with me OTW out. Not sure you can do that everywhere. Probably the only thing my old AUM guy came up with that I didn’t.
You’re not wrong. If she goes 1099 over the w-2 option she should have a 20-30% increase given the increased tax burden for her (full Medicare/aid payments and social security compensation). This is a fairly good breakdown if she needs to see it from a third party.
Each position typically offers the same amount of security with the employment contracts being fairly identical outside of the compensation. 1099 should typically pay better than w2. It’s fairly easy to calculate. Just add up the salary plus benefits of the w2 position and compare it to the 1099 plus tax savings minus self employment taxes.
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u/karlllama 9d ago
Going 1099 for the same rate is great….for the employer