1099 vs W2 job.. please advise

[Psych25]

I need advice on 2 jobs.

W2
360k base
RVU potential of 100k (easily met per other providers)
7 on 7 off
case load of 20-22
average 3 admits per day
call once per 7 on
adult populations

1099
460k
7 on 7 off
pt load is roughly 18
no call
average 2 admits a day
adult population

Comes down to 1099 vs W2. Jobs appear equal otherwise. Any advice would be appreciated. Thank you in advance!

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[TexasPhysician]

1099

 

[Psych25]

1099

Any specific reason? Thank you

 

[ObsequiousAplomb]

Any specific reason? Thank you

it's more money for less work. Do you need more reasoning?

 

[Psych25]

it's more money for less work. Do you need more reasoning?

Understand.. In the case that numbers being roughly equal as well as workload, what's the benefit to choose a 1099. I would imagine write offs would be limited in this case?

 

[calvnandhobbs68]

Understand.. In the case that numbers being roughly equal as well as workload, what's the benefit to choose a 1099. I would imagine write offs would be limited in this case?

Dude you need to search “1099” on SDN or go look at a couple personal finance sites to get a more in depth idea of benefits drawbacks of these two types of contracts.

The short of it is, no “write offs” would not be limited and at that income level it would be worth it to pay an accountant to set you up as an S corp (esp if you’re single) which could significantly reduce your tax burden. It’s also unlikely that you’ll be anywhere near 100K/year worth of benefits from the W2 job.

 

[Psych25]

Dude you need to search “1099” on SDN or go look at a couple personal finance sites to get a more in depth idea of benefits drawbacks of these two types of contracts.

The short of it is, no “write offs” would not be limited and at that income level it would be worth it to pay an accountant to set you up as an S corp (esp if you’re single) which could significantly reduce your tax burden. It’s also unlikely that you’ll be anywhere near 100K/year worth of benefits from the W2 job.

I appreciate your thoughts. I did do a search on here regarding 1099 vs W2. Most of what I came across was regarding outpatient. Others it seemed like people arguing both ways. I was just trying to get any new input. I agree it would likely be best to get an accountant.

Regarding the salary, it seems both jobs produce 460k. With a family of 4, is the W2 worth it from benefit prospective? Health insurance, 401k, etc.

Also, the W2 pays for malpractice with tail.

Please let me know you have any recommended threads already discussing this topic.

 

[TexasPhysician]

Any specific reason? Thank you

1099 - this essentially means you are your own business. This means all business tax benefits are in-play. This can be substantial. Most companies don’t offer W2 benefits that are anywhere near the tax benefits.

W2 - the only benefit to me is access to good health insurance. Can you obtain good health insurance for your family via alternative means? Marketplace plans in my state are terrible. If there is no alternative way to get health insurance for your family, I would probably go this route.

There are many “loopholes” out there to get health insurance if your spouse can assist. In some areas of the country, taking 2 community college classes per semester provides access to good health insurance plans as a “student” - you can include the whole family. In my areas, substitute teaching offers health insurance if you sub 1.5 or more days/week. They need subs.

Hiring a scribe and adding another part-time job on off weeks could also allow you to purchase a business plan for your family and your scribe.

It really comes down to whether or not you are handcuffed by health insurance.

 

[calvnandhobbs68]

I appreciate your thoughts. I did do a search on here regarding 1099 vs W2. Most of what I came across was regarding outpatient. Others it seemed like people arguing both ways. I was just trying to get any new input. I agree it would likely be best to get an accountant.

Regarding the salary, it seems both jobs produce 460k. With a family of 4, is the W2 worth it from benefit prospective? Health insurance, 401k, etc.

Also, the W2 pays for malpractice with tail.

Please let me know you have any recommended threads already discussing this topic.

So the 1099 one is guaranteed 460K for less patients per day and no call. You’re right that with the RVU bonus (which seems to be an interestingly hefty bonus) they’d come out the same but what happens if the unit slows down or they decide to change the RVU metrics? If you “easily” hit the RVU bonus every year, why don’t they just offer everyone 400+ right off the bat and make the bonus smaller? Theres lots of ways they can F with you down the line in a situation like that.

Outpatient vs inpatient doesn’t matter in terms of 1099 vs W2.

As mentioned above your big kicker is probably health insurance. But as I’ve mentioned in other threads this is highly region dependent. Some markets marketplace insurance is totally fine. I pay for a family of 4 on the marketplace and swing it with an income that’s substantially less that your top line income 1099. It’s pretty easy to go on the exchange websites and price it out. Also contact health insurers in your region directly to see if they offer non marketplace plans. recognize that health insurance premiums are deductible (even if you don’t itemize deductions) if you’re not eligible for other coverage so you’d be comparing pretax income.

Other benefits are really not going to make a huge difference unless this employer has great retirement benefits or something. I wouldn’t even factor malpractice considering it’s so cheap for psychiatry.

 

[Sushirolls]

1099

460K Income
-Health insurance for family of 4, ~15K for a High Deductible Plan
-7.8K to fully fund an HSA
-66K for full SEP IRA funding
=371K

- ~28% for SS and Medicare and Federal taxes
=267K in pocket
divide by 12, =22K in pocket monthly post taxes

 

[TexasPhysician]

1099

460K Income
-Health insurance for family of 4, ~15K for a High Deductible Plan
-7.8K to fully fund an HSA
-66K for full SEP IRA funding
=371K

- ~28% for SS and Medicare and Federal taxes
=267K in pocket
divide by 12, =22K in pocket post taxes

If your income is stable enough and high enough, defined benefit contribution maximum could be $150k+ even.

 

[Sushirolls]

Stability is the key. What's liklihood a person is going to key the same 1099 for the 10, 15, 20+ years whatever the requirement is for those defined pension plans? Low IMO. Hence why I avoid bringing them up on SDN.

 

[Merovinge]

1099

460K Income
-Health insurance for family of 4, ~15K for a High Deductible Plan
-7.8K to fully fund an HSA
-66K for full SEP IRA funding
=371K

- ~28% for SS and Medicare and Federal taxes
=267K in pocket
divide by 12, =22K in pocket post taxes

They would want a solo 401k to be fully funded, SEP IRA will stop you from doing backdoor roth IRA (which this person should absolutely be doing).

 

[Sushirolls]

Oh, and then do life insurance, 20-30 year whatever, Term? I think its called, for 1 million or whatever dollar value you want. ~$1000/year for million +/-
STD is ~$240/year for a 6 month coverage
LTD is much more expense than STD

A local state farm, geico, farmers, whatever insurance agency can set that up for a person.
Granted they will do a medical screen and labs on you to risk stratify, so might be more or less depedning on their variables.

In essence making you own benefits package isn't hard.

After getting over this hurdle of buying these things, and setting up the accounts, and doing the first year taxes with your CPA it will go from being such a foreign impossible feat, and the belief that only W2 is a real job, to the feeling of freedom.

 

[Merovinge]

Oh, and then do life insurance, 20-30 year whatever, Term? I think its called, for 1 million or whatever dollar value you want. ~$1000/year for million +/-
STD is ~$240/year for a 6 month coverage
LTD is much more expense than STD

A local state farm, geico, farmers, whatever insurance agency can set that up for a person.
Granted they will do a medical screen and labs on you to risk stratify, so might be more or less depedning on their variables.

In essence making you own benefits package isn't hard.

Right employed life insurance is usually worth very little at 1x salary. I get some terrible disability insurance that pays out after 6 months and stops at 2 years from my employer. The value of those combined is maybe a grand or something, everything beyond health insurance, PTO/CME/Sick days, 401k match %, and equity is of little to no value.

 

[finalpsychyear]

If your income is stable enough and high enough, defined benefit contribution maximum could be $150k+ even.

Great if you have a PP and can sustain that level of income but I dont think it makes a lot of sense even at 460 income when 401k is 68k, the person is young so limited contributions, and ability to sustain as a 1099 at a site not your own.

Stability is the key. What's liklihood a person is going to key the same 1099 for the 10, 15, 20+ years whatever the requirement is for those defined pension plans? Low IMO. Hence why I avoid bringing them up on SDN.

Spot on. I'm about to go to 7 years at one of my sites and they eventually have tried to convert me off of it so no guarantee even if your at the same place they want to keep you like that indef. I actually think if you max out a 401k esp as a 1099 being 68k and increasing yearly, max hsa, max 2 backdoor roth iras your almost at 90k in retirement savings and 75k in deductions from that. The def benefit you HAVE to contribute every year no matter what into something that grows 4-6% max... i think its overkill if your starting young but makes sense if your 50+ earning ALOT and plan to retire in 5-7 years.

 

[TexasPhysician]

Stability is the key. What's liklihood a person is going to key the same 1099 for the 10, 15, 20+ years whatever the requirement is for those defined pension plans? Low IMO. Hence why I avoid bringing them up on SDN.

It doesn’t have to be the same 1099 to my knowledge. The company is Sushirolls LLC and can contract with 1-10 places. The business is the same. You just need relatively stable income each year. I think 3 years is the minimum to not have some issues. Many psychiatrists are doing this.

 

[ObsequiousAplomb]

Understand.. In the case that numbers being roughly equal as well as workload, what's the benefit to choose a 1099. I would imagine write offs would be limited in this case?

the numbers and the workload aren't roughly equal. 460k guaranteed is far more money than 360 guaranteed with an additional 100k hidden behind a bonus. As others have said, if it's guaranteed, why isn't it part of the base pay?

One more admission and two to three more followups per day is not the same as one less admission and two or three fewer followups. If you're willing to do that work for free (work that is worth at least $400 more per day) in addition to being on call occassionally for free, then I guess feel free to work for free. I know I sure won't.

 

[Orgone]

It doesn’t have to be the same 1099 to my knowledge. The company is Sushirolls LLC and can contract with 1-10 places. The business is the same. You just need relatively stable income each year. I think 3 years is the minimum to not have some issues. Many psychiatrists are doing this.

3 years as a "safe" minimum is the number mentioned by firms that manage these, but the IRS guidelines are vague; I was told they can also be closed early if there is a compelling "business" reason, e.g. dramatic loss of revenue. And if you have a reason not to fund as much one year, you can keep the plan open but fund much less as long as you hit a minimum amount as determined annually by an actuary.

Also, although more common to run a defined benefits plan through an S-Corp or LLC entity, apparently it doesn't have to be, but can be done simply with a sole proprietorship.