Understanding the Differences Between W2 and 1099

Are you curious whether being a W2 employee or a 1099 independent contractor makes more sense? You’re not alone.

The primary differences between a 1099 and a W2 are:

• A 1099 form is only for payments made by an individual or entity to an independent contractor. There aren’t any tax payments or withholdings reported on a 1099. A 1099 employee is paid according to a contractual agreement, which depends on how, when and for whom they work.
• A W2 lists taxable compensation, including federal and state taxes, salary contributions to retirement plans and other withholdings. A W2 employee typically works for one employer who determines how and when they work and is paid according to an hourly wage or salary.

As an anesthesia provider, it can be tricky to decide what type of worker you should be. Here, we’ll explore key factors that can help you determine how best to move forward in your career.

Pros and Cons

Each type of work has pros and cons, and it’s important to understand the benefits of each so you can make the right choice for your financial needs.

Pros of working as an employee who receives a W2 include:

• Potential for benefits like paid training, health insurance and sick pay
• Predictable income is typically based on salaried work

Cons of working as an employee who receives a W2 include:

• Additional taxes, including FICA, FUTA and SUTA
• Typically requires a fixed, inflexible work schedule

Pros of working as a 1099 independent contractor include:

• Potential to earn more money while working fewer hours
• Better work-life balance due to a flexible, self-controlled work schedule

Cons of working as a 1099 independent contractor include:

• Less stability than a traditional job
• Pay can vary more than a W2 employee due to fluctuating market conditions

Legal Considerations for 1099 Contractors

If you decide to move forward as an independent contractor, it’s important to be aware of the legal requirements you must meet.

Since taxes won’t be automatically deducted from your earnings, you’ll need to pay estimated taxes in four installments throughout the year. The IRS recommends saving at least 30% of your income to pay estimated taxes. You’ll also need to be aware of state and local tax requirements so you can stay compliant.

Compliance with Regulations

In addition to paying taxes, you’ll also need to:

• Keep track of business expenses. Common deductions for 1099 independent contractors include supplies, home office costs and travel expenses.
• Check state regulations. While most states don’t require that independent contractors pay into unemployment insurance, some do. Be sure to stay on top of regulations in your state.
• Stay licensed. As a 1099 independent contractor, you’ll need to be sure that you keep your valid professional license. Requirements may vary by state.

Liability and Insurance

As an independent contractor, you’re required to purchase your own malpractice and liability insurance to keep you safe in the event that a patient makes a malpractice claim. Be sure to talk with your insurance company to ensure that your insurance policy covers your full scope of work as a 1099 anesthesia professional.

Contract Negotiation Tips

A rock-solid contract is important for your protection as a 1099 employee. Your contract should identify involved parties, provide a detailed explanation of the scope of your work, define payment terms (including amount, schedule and invoicing requirements) and include a termination clause that explains why the contract can be terminated.

Negotiation Strategies

Negotiating your contracts as a 1099 employee can ensure that you’re being paid fairly for your work, experience and efforts.

Some tips for effective 1099 contract negotiation include:

• Prepare. It’s important to understand what you bring to the table. During the negotiation process, speaking about your experience with confidence can help the contracting organization see you as an invaluable asset to their team.
• Know the changes you want to see in your contract. You may want to change the scope of work or payment terms listed on the contract, especially if the contracting organization has failed to include all services that might arise throughout your contract.
• Communicate well. Clear, concise communication is important when it comes to negotiating your contract. Use “I” statements to communicate the ways you’d like your contract to change.
• Get it in writing. Draft a proposal describing the changes you’d like to see in your contract. This allows both you and your employer to have a reference document detailing what you need to move forward.

Ready to Make the Switch to 1099? We’re Here to Support You.

At CCI Anesthesia, our team is here to help you transition from employee to 1099 contractor. As you make the switch, we’ll guide you through the process, ensuring that you’re taking the necessary steps to be fully protected and fairly compensated. For a deeper dive into the advantages of being an independent contractor, tune into our Unmasked podcast episode, Practicing as a 1099 Independent Contractor in Anesthesia. You’ll learn how this model affects your work-life balance and income.

Ready to take the next step? We’re excited to talk with you about the transition from W2 to 1099. Reach out to our team today at 844-937-1810, or click here to see our current opportunities and talk to one of our recruiters.