1099 vs W2: What’s the Difference?

As the healthcare industry continues to evolve, it’s important to understand the differences between 1099 contractors and W2 employees. Often 1099 is mistakenly referred to as a practice type when it only refers to a compensation model. You do not practice anesthesia independently because you file your taxes differently. You can be 1099 and have a or annual contract. You can be W2 and have a PRN contract. Often Both types of workers can provide valuable services, but they come with different benefits and drawbacks. In this article, we will explore the key differences between 1099 contractors and W2 employees, including tax implications, payment structures, and more.
To start, W-2 and 1099 are two different tax forms used to report income and taxes for individuals who work as professionals. The main difference between a W-2 and a 1099 is the employment status of the individual. If a provider is classified as an employee, they will receive a W-2 form, while if they are classified as an independent contractor or self-employed, they will receive a 1099 form.

A W-2 form, also known as the Wage and Tax Statement, is issued by an employer to an employee. It is used to report the employee’s wages, tips, and other compensation, as well as the taxes withheld from their paycheck. Professionals who are classified as employees of a hospital or healthcare facility will receive a W-2 form from their employer.

On the other hand, a 1099 form, specifically Form 1099-MISC, is used to report income received by individuals who are not employees but rather independent contractors or self-employed individuals. Professionals who work on a contract basis or provide services independently will typically receive a 1099 form from the entity or entities they have provided services to.

Receiving a W-2 

When a provider receives a W-2 form, it means that they are considered an employee of the hospital or healthcare facility where they work. The employer is responsible for withholding federal income tax, Social Security tax, and Medicare tax from the employee’s wages. These taxes are then reported on the W-2 form along with the total wages earned by the employee during the year.

In addition to reporting wages and taxes withheld, the W-2 form also includes other important information such as the employer’s identification number (EIN), the employee’s Social Security number (SSN), and details about any retirement plan contributions or other benefits provided by the employer.

Receiving a 1099

When a provider receives a 1099 form, it means that they are considered an independent contractor or self-employed. As such, they are responsible for paying their own taxes, including federal income tax, Social Security tax, and Medicare tax. The entity or entities that have engaged the provider’s services will report the total amount paid to them on the 1099 form.

Unlike a W-2 form, a 1099 form does not include any taxes withheld or employer contributions. It is solely used to report the income received by the provider as an independent contractor. It is important for professionals who receive a 1099 form to keep track of their income and expenses throughout the year in order to accurately report their earnings and deductions when filing their taxes.

Determining Employment Status

The determination of whether a provider is classified as an employee or an independent contractor depends on several factors, including the level of control exercised by the employer over the provider’s work, the degree of independence in performing the job, and the presence of a written contract between the parties.

It is worth noting that misclassifying employees as independent contractors can have legal and financial consequences for employers. The Internal Revenue Service (IRS) has specific guidelines and criteria to determine whether an individual should be classified as an employee or an independent contractor. Employers who misclassify employees may be subject to penalties and fines.

When comparing W2 and 1099 offers, there are several factors to consider. Both types of employment arrangements have their own advantages and disadvantages, so it is important to carefully evaluate each offer based on your individual circumstances and preferences. 

W2 Employment

1099 Independent Contractor

A W2 employment arrangement refers to being hired as an employee by a healthcare facility or organization. In this case, the employer is responsible for withholding taxes from your paycheck, providing benefits, and offering certain protections under labor laws. Here are some key points to consider when comparing W2 offers:

1. Stability and Security: W2 employment typically provides more stability and job security compared to 1099 arrangements. As an employee, you may have access to benefits such as health insurance, retirement plans, paid time off, and professional development opportunities.

2. Tax Withholding: With a W2 arrangement, your employer will withhold taxes from your paycheck, including federal income tax, state income tax (if applicable), Social Security tax, and Medicare tax. This can simplify your tax obligations as the employer takes care of the calculations and payments.

3. Employer Contributions: In a W2 arrangement, employers often contribute towards benefits such as health insurance premiums, retirement plans (e.g., 401(k)), and other perks. These contributions can add significant value to your overall compensation package.

4. Legal Protections: As an employee, you are entitled to certain legal protections under labor laws, including workers’ compensation coverage in case of work-related injuries or illnesses.

5. Limited Flexibility: W2 employment generally offers less flexibility in terms of setting your own schedule or choosing assignments. You may be required to work specific shifts or adhere to a predetermined schedule set by the employer.

A 1099 independent contractor arrangement involves working as a self-employed individual or through a staffing agency. In this case, you are responsible for paying your own taxes and do not receive benefits from the employer. Here are some factors to consider when comparing 1099 offers:

1. Higher Earning Potential: Independent contractors often have the potential to earn higher hourly rates compared to W2 employees. This is because they are responsible for covering their own taxes, benefits, and other business expenses.

2. Flexibility and Autonomy: As a 1099 contractor, you have more control over your schedule and assignments. You can negotiate contracts, choose which facilities or organizations to work with, and have the freedom to take on additional work outside of your primary contract.

3. Tax Considerations: Unlike W2 employees, independent contractors are responsible for calculating and paying their own taxes. This includes federal income tax, state income tax (if applicable), self-employment tax (which covers Social Security and Medicare contributions), and potentially estimated quarterly tax payments.

4. No Employer Benefits: As an independent contractor, you will not receive benefits such as health insurance, retirement plans, or paid time off from the employer. It is important to factor in the cost of obtaining these benefits independently when comparing offers.

5. Business Expenses: Independent contractors can deduct certain business expenses related to their work, such as professional liability insurance, continuing education costs, travel expenses, and equipment purchases. These deductions can help offset some of the additional costs associated with being self-employed.

Main Takeaway

When comparing W2 and 1099 offers as a professional, it is crucial to carefully evaluate the specific terms and conditions of each offer. Consider factors such as compensation, benefits, job security, flexibility, tax implications, and personal preferences before making a decision.  You will need to compute the value of your current benefits as a W2 and then break that down into an hourly rate to see if the 1099 position is equivalent or better.  This process takes some work, but this will be the real determinant as to whether this move makes financial sense.

About The Author: CRNA Financial Planning

Consider working with a professional who understands the unique elements of CRNA businesses. Furthermore, to keep your business and personal finances organized and streamlined, it can be beneficial to integrate your tax planning with your financial planning. With decades of experience working exclusively with CRNAs, CRNA Financial Planning® can help. Call them at 855.304.3748 or email [email protected] for more information.


  • Protect yourself and your assets by performing your contract work under the umbrella of a business entity. Think about what you’d like your proposed business to be named!
    • Visit your Secretary of State website to see if your chosen name is available
    • Check with your state’s Board of Nursing for state specific requirements
  • File applicable business set-up paperwork
  • The S-Corp Edge: How you structure your 1099 CRNA business will have far-reaching consequences, whether it is a sole proprietorship, a limited liability corporation (LLC), or an S corporation (S-corp). 
    An S-corp may offer several advantages over other business structures when it comes to taxation. In this structure, a business owner is called a shareholder, and the business owner is recognized by the IRS as an employee of the business. What this means is that the business owner must pay themselves a salary through the corporation. The S-corp pays their payroll taxes, which can in turn be deducted as a business expense. Income tax is paid through its owners’ tax returns based on their percentage of ownership. Moreover, any remaining profits have a lower tax rate than regular income. An S-corp may also allow 1099 CRNAs to avoid a higher tax level that other self-employed contractors pay for Medicare and Social Security.
          A CRNA may structure their company as an S-corp serving as the sole owner, with their business income, tax deductions, and losses passing through to the owner, as opposed to being taxed at a corporate level – a potentially smart move for maximizing financial security in the future.
    • Register for an EIN
  • Open a business checking account and credit card
  • Keep track of all your business expenses as these could save you money come tax time!
    • Have an envelope for receipts or a folder on your computer where you scan these into
  • Be sure not to co-mingle your business and personal finances!
  • Remember, as a freelance CRNA, if you don’t work, you don’t get paid!
    • Do you have at least six months savings should your contract abruptly stop?
  • Think about replacing your current benefits
    • Health Insurance
    • Health Savings Account/Dependent Savings Account
    • Retirement Savings Account
    • Life Insurance
    • Disability Insurance
  • Procure malpractice insurance
  • Look for jobs!
  • Apply for state licenses where you want to work
    • Each state needs a different CRNA license (and RN if they are not a compact state). Keep this in mind as some BONs can take 3-6 months to license a provider.
  • Have an employment attorney review your contract
  • Have your contract written to your business and deposit all earnings into your business checking
  • Keep A Schedule
  • As a W-2 employee, your taxable income and amounts taken out for taxes appeared on your W-2 form at the end of every year, without you having to calculate them. But when a firm pays more than $600 for services from an independent contractor, that income must be reported to the IRS.
    What many 1099 CRNAs don’t realize is that they must pay taxes on their income as they earn it. Paying your quarterly estimated income taxes will be a new part of running your business successfully. 
          It doesn’t sound so difficult—keeping track of paying estimated income tax only happens four times a year. But the reality is a late payment can result in penalties and fines from the IRS. Keeping a schedule to help you stay on top of your quarterly estimated tax payments, and paying adequately to avoid underpayment, is imperative in avoiding penalties in the future. Not to mention providing peace of mind!
  • Make sure you have a trusted team of accounting and/or financial professionals who have experience with freelance CRNAs to guide you through this process!
  • CPAs
  • Financial Planners
  • Bookkeepers
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