The Big Picture
As a CRNA, you may have opportunities to work as a W-2 employee or a 1099 independent contractor. This decision significantly impacts your taxes, benefits, and take-home pay.
Quick Comparison
| Factor | W-2 Employee | 1099 Contractor |
|---|---|---|
| Gross Pay | Lower | Higher |
| Tax Burden | Simpler | More Complex |
| Benefits | Included | Self-Funded |
| Job Security | Higher | Lower |
| Flexibility | Less | More |
| Take-Home (after all costs) | Often Similar | Varies Widely |
Understanding W-2 Employment
What You Get
- Fixed salary or hourly rate
- Benefits typically include:
Tax Implications
- Employer pays half of FICA (7.65%)
- Taxes withheld from paycheck
- Standard deductions only
- Simple tax filing
Typical W-2 Package Value
| Component | Value |
|---|---|
| Base Salary | $210,000 |
| Health Insurance (employer portion) | $12,000 |
| Retirement Match (5%) | $10,500 |
| PTO (4 weeks) | $16,000 |
| Malpractice | $3,000 |
| CME + Dues | $2,500 |
| **Total Compensation** | **$254,000** |
Understanding 1099 Contracting
What You Get
- Higher hourly rate (to offset lack of benefits)
- Flexibility in scheduling
- Business ownership experience
- Tax deductions opportunities
What You Provide
- Self-employment taxes (full 15.3% FICA)
- Health insurance
- Retirement savings
- Malpractice (if not covered by client)
- Business expenses
- PTO is unpaid
Tax Implications
| Tax Type | Rate | On |
|---|---|---|
| Federal Income | 22-37% | Net Income |
| State Income | 0-13% | Net Income |
| Self-Employment | 15.3% | First $168,600 |
| Medicare Surtax | 0.9% | Over $200K |
Typical 1099 Calculation
| Component | Value |
|---|---|
| Gross Billing | $280,000 |
| Self-Employment Tax | ($21,450) |
| Health Insurance | ($12,000) |
| Retirement Contribution | ($23,000) |
| Malpractice | ($3,000) |
| Business Expenses | ($5,000) |
| **Net Before Income Tax** | **$215,550** |
Side-by-Side Comparison
Scenario: Same Effective Pay
| Factor | W-2 @ $210K | 1099 @ $270K |
|---|---|---|
| Gross | $210,000 | $270,000 |
| FICA Paid By You | $8,033 | $20,655 |
| Health Premium | $4,000 | $15,000 |
| Retirement | $0 (employer funded) | $23,000 (self) |
| Malpractice | $0 | $3,000 |
| Net (pre-income tax) | $197,967 | $208,345 |
In this example, 1099 at $270K is roughly equivalent to W-2 at $210K.
Tax Advantages of 1099
Deductible Expenses
- Home office (portion of rent/mortgage)
- Vehicle expenses (business use portion)
- Professional development/CME
- Professional dues and licenses
- Business cell phone/internet
- Business travel (not commuting)
- Health insurance premiums (self-employed deduction)
Retirement Advantages
| Account | 2025 Limit |
|---|---|
| Solo 401(k) Employee | $23,000 |
| Solo 401(k) Employer | up to $46,000 |
| Total Solo 401(k) | $69,000 |
| SEP-IRA | $69,000 |
Compare to employee 401(k): $23,000 max
S-Corp Election
- Form LLC, elect S-Corp status
- Pay yourself "reasonable salary" (~$120K)
- Take remainder as distribution
- Save 15.3% SE tax on distributions
- Potential savings: $15,000-25,000/year
Must work with CPA to implement correctly.
When W-2 Makes Sense
Choose W-2 if:
- You value simplicity and predictability
- You want employer-funded benefits
- Job security is important
- You don't want to run a business
- You're risk-averse
- You have family coverage needs
Best W-2 Opportunities
- Hospital systems with strong benefits
- Group practices with partnership track
- Academic positions
- Union positions with guaranteed hours
When 1099 Makes Sense
Choose 1099 if:
- You earn enough to offset lost benefits
- You're comfortable with tax complexity
- You want maximum retirement contributions
- You're building a business or practice
- Flexibility is a priority
- You're healthy and can get good individual insurance
Best 1099 Opportunities
- Locum tenens work
- Private practice contracting
- Multiple facility arrangements
- High-rate permanent contracts
Red Flags to Watch
Misclassification Risk
- Sets your schedule
- Provides equipment/supplies
- Tells you how to do the work
- Prevents you from working elsewhere
IRS can reclassify and impose penalties on employer.
Too-Good-To-Be-True Rates
- You may be losing money after benefits
- Do the full math before accepting
Hidden Costs
- Individual health insurance can be expensive (especially family)
- Malpractice tail coverage if you leave
- Quarterly estimated taxes (pay or penalized)
- Business formation and accounting costs
Making Your Decision
Calculate Your Break-Even Rate
- Take equivalent W-2 salary
- Add employer benefit costs (~15-20% of salary)
- Add 7.65% employer FICA portion
- Add 10% buffer for risk/complexity
Example: $210K W-2 → Need ~$280K+ 1099 to break even
Questions to Ask
- What benefits are included (if any)?
- Who covers malpractice?
- What's the minimum commitment?
- Can I work for other clients?
- Who controls scheduling?
Conclusion
Neither W-2 nor 1099 is universally better. The right choice depends on the specific rates offered, your personal situation, and your risk tolerance. Always run the numbers with a qualified CPA before making major employment decisions.
This is general information, not tax advice. Consult a CPA familiar with healthcare professionals.