– Whether it’s the main job or a side gig, doctors are either W-2 employees or 1099 workers. – In the eyes of the IRS, the difference between a W-2 and 1099 physician or any other worker is the relationship between the parties.
– A business has the right to control and direct the work of a W-2 employee. – On the other hand, a business can’t direct what a 1099 contractor does and how they do it; rather, the business can only tell a 1099 worker what the result of the work must be.
– You can expect a higher compensation for 1099 work than for W-2 work. – Payment for physician independent contracts may be higher for a few reasons. As a 1099 worker, you’re responsible for paying the full amount for FICA taxes.
– You are also very likely to encounter more expenses as a 1099 physician than a W-2 employee. These expenses might include the equipment needed to do the work or fees incurred along the way.
– Physicians must pay tax on any income that is reported on a 1099-MISC. This includes income tax and FICA tax (comprised of Medicare and Social Security tax). – Whereas income tax is generally withheld from your paycheck with a W-2 job, as a 1099 worker you need to estimate and pay income taxes yourself.
– For a W-2 employee, FICA tax is paid partly by the employer and partly by the employee (coming directly out of the paycheck). Independent contractors, on the other hand, are responsible for the entire amount..
– In most cases, your employer will directly cover or fully reimburse all work-related expenses that you incur as a W-2 physician. If they don’t, though, such expenses are generally not reimbursable. – Self-employed taxpayers can deduct necessary and ordinary business expenses.
– For physicians, necessary and ordinary expenses can really add up, including things like medical license fees, CME, and malpractice insurance premiums. As a result, it’s important to know who will be paying for these expenses and – if it’s you – whether they can be considered tax deductions.
– A w2 employee receives Health insurance, disability insurance, retirement plans, paid time off, CME allotment, and student loan repayment plans can make up a sizeable percentage of a physician’s overall compensation plan.
– Many 1099 workers are not eligible for any of these benefits. The financial impact of this can be substantial.
– Your position as a W-2 employee comes with a lot of legal protections. For instance, you can’t be terminated for certain reasons. You qualify for unemployment benefits, maternity leave etc. – You’re on your own as an independent contractor.
Both types of work arrangements have advantages and disadvantages. Think about the big picture: – What are your overarching goals in working with the company? – How will your income taxes will be affected?
– What expenses will you incur? – Under what circumstances your work with the company will come to an end?