W2 vs 1099

[midwesterner123]

As I am a new graduate from residency can you tell me in the field of anesthesiology in present day 2015, which is better a W2 position or a 1099 position?

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[aneftp]

Depends how good the benefits are as W2.

I have been both.

As a general rule there are more tax advantages as a 1099. Usually you can make ur "effective" tax rate around 10-15% as a percentage of ur total 1099 income. Some people are savvy enough or just like to play the game so much where their effective tax rate is like 5-8% after all their business deductions. I had friend who purchase like 5 flat screen Phillips elite flat screens when they were $5000 each back in the mid 2000s just so he could have a $25000 write off. But that's just waste ful spending to me. Cause at the end of the day ur deduction is really just about a 33% discount.

Anyways compare what ur actual benefits are as a W2. Some W2 jobs suck in terms of benefits.

Do you have access to more 403b? 457b? Roth 457b or 403b? As W2? Do u have access to 401a with immediate vesting 9-10% matching?

What's the W2 health benefits worth?

So u have to do a lot of math. Sick leave? Paid holidays?

I also been in academics where benefits were worth easily $50k-70k each year.

There are W2 jobs that don't give u jack either. No paid sick leave. No tail can't coverage. No health benefits for spouses or dependents. No paid holidays. No sick leave

 

[sevoflurane]

It all really depends on the gig and your particular situation. I'm going from a 1099 to a W-2.
I much prefer my old 1099. My current benefits are excellent, but my old 1099 let me do a lot more with my finances and structure of my business. You can't really say one is better than the other without looking under the covers with scrutiny.

 

[midwesterner123]

What about going from a 1099 status to incorporating. If you do decide to incorporate does your employer hire you as a 1099 but you are actually incorporated or does the employer hire you as incorporated employee? Also if your employer offers you health insurance should you take it or get your own under your own corporation?

 

[2ndyear]

You can incorporate yourself. Your corporation just gets paid 1099 then. There may be other advantages to incorporate depending on the state and you should really check with a lawyer to find out. But functionally it makes no difference.

As for health insurance it depends on what's offered. I got a few quotes this year and it wasn't really cheaper to get decent insurance on the open market. But your situation may be different. If you're young and single and healthy then you might be able to get a better deal on the open market. Especially if the employer doesn't offer high deductible HSA plans.

 

[Gaseous Clay]

Just my opinion, but there are so many other factors related to a job that I'd rank over a 1099 vs W2. If all else were equal, I'd go with the W2 with good benefits. Yeah, you can learn to work the system, right off everything you can, and hire a good accountant, or you can be like me where my group covers everything and I meet with my accountant for 30 minutes each year. To calculate my miles on call, write off and keep receipts of meals while on call, and crunch numbers until you border illegal ... yeah, not for me. (No offense to the 1099ers out there who love it, just not for me, I like to KISS).

 

[aneftp]

Just my opinion, but there are so many other factors related to a job that I'd rank over a 1099 vs W2. If all else were equal, I'd go with the W2 with good benefits. Yeah, you can learn to work the system, right off everything you can, and hire a good accountant, or you can be like me where my group covers everything and I meet with my accountant for 30 minutes each year. To calculate my miles on call, write off and keep receipts of meals while on call, and crunch numbers until you border illegal ... yeah, not for me. (No offense to the 1099ers out there who love it, just not for me, I like to KISS).

Issue is unless u work for big academic place with state govt benefits or work with private hospital base that's hospital employee, You probably won't get many good benefits working for AMC or small private group as a W2.

When I worked in academics. I "only" got 5 weeks of vacation which seems low on paper. Private AMcs offered 8 weeks off. But many force u to take one full week at a time.

I could take random days out of my 5 weeks so can stretch my vacation days more. Plus they rolled over so I could have more the following year.

Plus got 2 weeks paid cme also. And sick leave was very liberal. Essentially could take 12 sick days a year.

If my kid had dental appt I would schedule a day off.

So my 5 weeks vacation ends up being close to 9 weeks off.

And academics can offer u close to $50k pretax voluntary deferral (401a, 403b and 457b). Plus they throw in $20-25k also.

So the math is very complicated with W2. Cause many AMCs don't offer much in terms of tax savings. And that's a real killer since u get taxed a lot as W2.

 

[Gaseous Clay]

Issue is unless u work for big academic place with state govt benefits or work with private hospital base that's hospital employee, You probably won't get many good benefits working for AMC or small private group as a W2.

When I worked in academics. I "only" got 5 weeks of vacation which seems low on paper. Private AMcs offered 8 weeks off. But many force u to take one full week at a time.

I could take random days out of my 5 weeks so can stretch my vacation days more. Plus they rolled over so I could have more the following year.

Plus got 2 weeks paid cme also. And sick leave was very liberal. Essentially could take 12 sick days a year.

If my kid had dental appt I would schedule a day off.

So my 5 weeks vacation ends up being close to 9 weeks off.

And academics can offer u close to $50k pretax voluntary deferral (401a, 403b and 457b). Plus they throw in $20-25k also.

So the math is very complicated with W2. Cause many AMCs don't offer much in terms of tax savings. And that's a real killer since u get taxed a lot as W2.

You raise excellent points. Obviously there are many pros and cons of each one. Since I have no experience with 1099, by no means am I an expert. I did interview at a few places that were paid 1099 and they seemed to like that model. As I said before, the way you get paid is probably last on my list of top 10 things to look for in a job. I feel fortunate that I am in a good (again, my opinion, my partners may disagree with me) PP group that pays me well each month, covers medical insurance for the family, CME, malpractice, adds in over $30k/year profit share into 401k, etc ...

Is my tax bill high? Heck yea it is. I met with my accountant today and we literally spent 30 mins for my wife and I (she also works making low 6 figures) and 75% of the talk was about other things. It's simple for me, I still get big tax breaks with mortgage insurance and other deductions, and I don't have to worry about keeping receipts and calculating mileage and other "office" expenses.

To the OP, don't worry about 1099 vs W2 ... pick the job based on other factors. Obviously if you are offered 300k with full benefits and retirement, then that same job should probably be worth 350k and you cover the rest (just a random guess, I am sure I'm way off) on a 1099. Good luck, probably easiest if you get job offers, throw out the real details and numbers and some of us can give our opinions.

 

[Ezekiel2517]

I'm 1099, I think it has it's advantages, especially if you have a good accountant. I'm also S-corp, by rough estimate I'd say it saves me 8-10k a year by doing it. Not a lot but it's something

 

[pjl]

Benefits are VERY expensive if 1099, but most pay those first, before saying the salary, like for my job I would tell someone we make XXX when it really is XXX plus at least 75k-100k benefits. Some may combine though, so just be sure you get accurate info. You also end up paying employers half of health insurance etc.
For us, basically all money goes into a pot, expenses come out for group, then individual, then you see your "take home," which will later need to have taxes paid on it. If you ask my partners what we make, one guy will say total plus benefits, the other total after benefits, the third his after tax, the fourth the after tax after ex wife payment.
It was much simpler to be handed a W2 with taxes and benefits already removed, but I have "unlimited" CME fund, and certain business expenses that bill direct to company (no, no 80 inch tvs here). You can get better benefits from W2 or 1099 depending on the group, the way they pay you has no relevancy in what the benefits are.