1099 vs. W-2: Which Work Structure Wins for CRNAs?

Adapted from Episode 6 of The Financial Cocktail podcast. Listen wherever you get your podcasts, or read the full episode below.

Today we’re tackling one of the most important, and most misunderstood, decisions a CRNA will ever make. Let me start with a couple of questions.

Are you a 1099 contractor or a W-2 employee? More importantly, do you know why you are?

For most CRNAs, the decision got made by default. You took the job, signed the paperwork, and moved on. But how you get paid has enormous consequences for your taxes, your retirement savings, your benefits, and your long-term wealth.

By the end of this post, you’ll know what each structure means, what it costs you, what it earns you, and how to decide which one fits your life.

Here’s something to think about: the income gap between 1099 and W-2 CRNAs often exceeds $50,000 a year. Is that because the 1099 crew works harder? Maybe. But often it comes down to knowing how to use the structure, and that’s what we’re going to unpack.

If you want a specific job, you may not get to choose between W-2 and 1099. But if you do have options, you need to understand what actually separates the two, and it goes much deeper than how your paycheck looks.

W-2 Employment

About 80% of CRNAs are W-2 employees. You’re employed by a hospital, health system, anesthesia group, or staffing company. You are an employee; that’s the distinction.

Taxes are withheld automatically from every paycheck: federal and state income tax, Social Security, and Medicare. (It always makes me think of the Friends episode where Rachel asks who FICA is.)

Your employer pays half of your FICA taxes. You pay 7.65%, and your employer pays another 7.65% on your behalf. You never see that in your paycheck, but it’s real compensation, and it’s a genuine benefit of being a W-2 employee.

Benefits are built in. Common ones in anesthesia include:

• Health insurance, or at least a large share of the premiums

• Malpractice coverage

• PTO and sick leave

• CME allowance

• A retirement plan, such as a 401(k), 403(b), or 457

Predictability is the selling point. A consistent schedule, a consistent paycheck, a known workplace, and less financial admin on your end.

That’s the theory, anyway. The longer I’m in this field, the more “job security” reveals itself as a misconception. I’ve seen too many W-2 positions go sideways, and at a handful of places I’ve covered, that security is something of an illusion.

1099 Independent Contracting

As an independent contractor, you don’t work for the hospital, and you shouldn’t be treated as an employee, because you aren’t one. You’re self-employed: a business of one, or more if you have an LLC taxed as an S-corp.

No taxes are withheld. You’re responsible for paying quarterly estimated taxes directly to the IRS, and possibly your state.

You owe both halves of FICA: the full 15.3% self-employment tax on net earnings, though half of it is deductible (more on that below).

There are no employer-sponsored benefits, because you are the employer. You source and pay for your own health insurance, malpractice, retirement plan, CME, and so on.

The appeal of contracting is flexibility, if the market allows. In theory, you set your own schedule, choose your facilities, and take contracts that match your income goals and lifestyle.

I say “if the market allows” because when surgeries were cut back during COVID, 1099 contractors were the first to go. Plenty of W-2 employees took big pay cuts, but locums were cut first.

1099 work also means piecing together a schedule, which can leave gaps. I often take rural jobs, which makes it hard to pick up extra weeks or weekends elsewhere. Right now, I’m working essentially full time, four weeks a month. Picking up weekends is tough when most other facilities are a three- to five-hour drive away. There’s no way to cover a weekend and make it back for my 6:30 a.m. Monday start.

The 1099 courses tend to glorify this part of the work, but it isn’t a magical way to work wherever, whenever, and however you want. There are pros and cons.

Who Decides Whether You’re W-2 or 1099?

Sometimes a job offers both options. But your classification isn’t always your choice, and this is often misunderstood.

The IRS uses a multi-factor test centered on three areas:

• Behavioral control: Who controls how, when, and where you work?

• Financial control: Who controls the business side of the work?

• The nature of the relationship: Is it ongoing, with benefits and an expectation of continuing work?

Misclassification, being paid as a 1099 contractor when you should legally be W-2, is a real issue in health care, and it can expose both parties to liability. Some facilities treat contractors like employees while stripping away the flexibility contracting is supposed to offer.

Keep in mind that true contractors generally don’t have mandatory hours or shift requirements, required attendance at routine operational meetings or company trainings, or tightly dictated workflows. Employees typically have an ongoing relationship with a single entity. There’s a lot of gray area, especially in anesthesia.

The Tax Picture (2026 Figures)

This is where a lot of CRNAs leave money on the table.

W-2 taxes

The W-2 picture is fairly straightforward. Federal and state income taxes come out of every paycheck automatically.

Social Security: 6.2% of wages up to $184,500 in 2026, up from $176,100 in 2025

Medicare: 1.45% on all wages, with no cap

Additional Medicare tax: 0.9% on wages above $200,000 for single filers or $250,000 for married couples filing jointly. An extra special bonus for y’all.

Your employer’s share: your employer quietly pays its 7.65% half of FICA. It never appears on your paycheck, but it’s part of your compensation.

The downside: W-2 employees can deduct very little. You generally can’t deduct malpractice premiums, licensing fees, CME, or much else, because that’s how employee status works.

You’re essentially limited to the standard deduction plus the big three tax-advantaged accounts. Some people itemize with the state and local tax (SALT) deduction, mortgage interest, or charitable giving, but with the standard deduction for married couples over $30,000, most don’t get that far.

1099 taxes

The self-employment tax will sound familiar:

15.3% on net self-employment income up to $184,500

2.9% Medicare on everything above that

Plus the 0.9% additional Medicare tax above $200,000 single or $250,000 married filing jointly

It’s essentially the same recipe, except you pay the extra 7.65% your employer would have covered. Feels good.

Here’s the good news.

Half of your self-employment tax is deductible. It’s an above-the-line deduction on your federal return. It’s a partial offset. It still stings.

Business deductions are powerful. Malpractice premiums, professional licensing, CME, a home office, business travel, equipment, and professional subscriptions are all potentially deductible against your gross income. That could be its own episode.

Locums in particular often have significant travel expenses. Agencies or hospitals sometimes provide a stipend or cover housing. When you travel full time, those costs can run around $75,000 a year, so being able to write them off, especially when you’re also receiving a stipend, is a big deal.

The qualified business income (QBI) deduction is the magical unicorn sparkle of every 1099 course. Sole proprietors and owners of other pass-through businesses can deduct up to 20% of qualified business income.

The important caveat: CRNAs almost certainly fall under the “specified service trade or business” (SSTB) category for health services. For SSTBs, the deduction phases out as taxable income rises. In 2026, it begins phasing out around $201,000 for single filers and $403,000 for married couples filing jointly, and disappears entirely around $276,000 single and $553,000 married filing jointly.

So depending on your household’s taxable income, many 1099 CRNAs can capture a large chunk of the deduction. High-earning locums, on the other hand, often earn too much to qualify. Oh well.

Section 199A, the provision behind the QBI deduction, was made permanent by the One Big Beautiful Bill Act in 2025. It’s no longer temporary, so you can plan long-term around where your income will fall.

Quarterly estimated taxes are non-negotiable. Missing them triggers IRS underpayment penalties.

Sole Proprietor, LLC, or S-Corp?

For most 1099 CRNAs, a sole proprietorship is the straightforward choice. There are a few reasons to form an LLC and have it taxed as an S-corp, but you need to do it with intention. People generally overcomplicate this, and a sole proprietorship will be fine for most.

That said, electing S-corp status is a legitimate tax strategy. Most people don’t need it; I think CPAs talk a lot of people into it.

First, a distinction: the LLC is the business entity. S-corp is a tax filing status the LLC can elect.

Here’s the key mechanic. As an S-corp owner, you pay yourself a “reasonable” W-2 salary, just like any other W-2 job, subject to all the usual payroll taxes. The difference is that your own company is the employer. Any profit above your salary flows through as a distribution, which isn’t subject to self-employment tax.

This is a nuanced area that deserves its own episode, but that’s the general idea. Depending on who you ask, the break-even point where an S-corp starts saving meaningful money is somewhere between $100,000 and $150,000 of net income. Most CRNAs, even part-timers, clear that threshold.

Why I use an S-corp

I have an LLC taxed as an S-corp for two reasons, and only two.

1. Health insurance. Mrs. TFC no longer practices clinically. She does the books for the company, manages our travel arrangements, and takes care of the kids at home. That last part isn’t part of the business, and she doesn’t get paid for it. Because she’s employed by the business, we can get the health coverage we want: a high-deductible Blue Cross Blue Shield plan with nationwide in-network coverage, so we don’t get hit with crazy out-of-pocket costs while we travel. Since she isn’t offered benefits through any other employer, our premiums are essentially paid by the business as a business expense.

2. Her retirement savings. As an employee of my LLC, Mrs. TFC gets a W-2 and has her own Solo 401(k). And her employer is a pretty nice guy: he gives her a generous 25% employer contribution.

Notice what’s not on that list. We don’t use an LLC as a corporate veil against litigation. Medical malpractice suits are personal, so if you think an LLC will shield you from one, you’re wasting your time.

Most CRNAs can be sole proprietors and get nearly all the same 1099 benefits without the hassle of running an S-corp. I think the S-corp is overplayed and overhyped.

Retirement Accounts: Where the Real Divergence Happens

Taxes are one thing. Retirement benefits are where the long-term wealth gap between 1099 and W-2 really opens up.

W-2 CRNAs

W-2 CRNAs have standard but fairly limited options: a 401(k), 403(b), or sometimes a 457 through their employer. 2026 limits:

• Employee contribution: $24,500

• Catch-up (ages 50 to 59 and 64+): an extra $8,000, for a total of $32,500

• Super catch-up (ages 60 to 63): SECURE 2.0 raised the catch-up to $11,250, for a total of $35,750

Note that starting in 2026, high earners whose prior-year FICA wages exceeded $150,000 must make catch-up contributions as Roth.

The employer match is usually 3% to 6%, occasionally higher. It’s free money, and it varies widely. Some CRNAs get nothing; others get 15%.

Defined benefit pensions are rare, but they still exist at some hospital systems, particularly academic medical centers.

The takeaway: you’re limited to what your employer offers. You can’t open a Solo 401(k) on the side unless you have self-employment income.

1099 CRNAs

This is the hidden advantage, the real sweet spot.

Solo 401(k): You contribute as both the employee, up to $24,500, and the employer, up to 25% of the salary you pay yourself through an S-corp or about 20% of net self-employment earnings as a sole proprietor. The combined limit is $72,000 for 2026. Catch-ups stack on top: an extra $8,000 at ages 50 to 59 and 64+, or $11,250 at ages 60 to 63, for a total of about $83,000. Pretty dope. (For the full breakdown, see Episode 3 on the Solo 401(k).)

SEP IRA: The old-school option. You can contribute up to 25% of compensation, but there’s no employee deferral and no catch-up contribution. It tries to do what a Solo 401(k) does, just worse in almost every way. If you have the option, go Solo 401(k).

Defined benefit and cash balance plans: These are for high earners who want to shovel away a lot of money. Depending on age and income, contributions can reach $200,000 or more a year. Admin costs are significant, but they can be powerful for higher-income CRNAs in their peak earning years. They have drawbacks, including long-term funding commitments, and I don’t use one.

Most people max their own $72,000 Solo 401(k) and get their spouse’s retirement savings going. Very few people are putting away half a million dollars a year, so don’t sweat it.

Both: The backdoor Roth IRA

W-2 and 1099 CRNAs alike can use a backdoor Roth IRA. This is a retirement account for individuals. The 2026 IRA contribution limit is $7,500, plus a catch-up for those 50 and older. At CRNA income levels, you can’t contribute to a Roth IRA directly. Instead, you contribute $7,500 to a traditional IRA and then convert it to Roth. For tax diversification, going Roth here is often a smart move.

The Benefits You Pay For Yourself as a 1099 CRNA

There’s a lot in the W-2 package that you don’t see, and as a 1099 contractor you have to replace all of it. That can easily add up to $50,000 a year in benefits.

• Health insurance. The big one. On the individual market, a healthy CRNA in their 30s or 40s can expect to pay at least $400 to $800 a month, with premiums rising quickly. Family coverage can easily exceed $2,500 a month. Employers typically cover around 80% of premiums, so family coverage that costs you $400 a month as a W-2 employee could cost about $2,000 when you pay the full premium yourself.

• Malpractice insurance. Typically $1,500 to $5,000 or more a year, depending on your state and practice setting.

• Disability insurance. Critical for any high-income clinician. Budget $3,000 to $7,000 a year for a solid own-occupation policy. Employer policies are often inadequate, but supplementing one as a W-2 employee is much cheaper than buying a full policy on your own.

• Life insurance. An employer might provide a $50,000 policy. Not enough, but better than nothing.

• PTO. As a 1099 contractor, if you don’t work, you don’t earn. Factor this into your effective hourly rate.

• CME. W-2 allowances typically run $1,500 to $3,000 a year. As a 1099 contractor, you pay it all out of pocket.

The good news is that many of these costs are deductible against business income. Not all of them, though. Be careful with disability insurance: if you deduct the premiums, a future benefit payout becomes taxable. Pay those premiums with after-tax dollars.

Running the numbers

Say a 1099 CRNA earns $50 an hour more than a W-2 peer. Over 2,080 hours a year, that’s about $100,000 more in gross pay.

Now subtract the extra self-employment tax, health insurance, malpractice, disability, and the value of PTO (how much to subtract for PTO is subjective). The real advantage often shrinks from $100,000 to somewhere around $30,000 to $60,000.

That’s still meaningful, but you need to know your number and the advantages you can use as a 1099 CRNA. From the numbers I’ve crunched, most W-2 CRNA benefit packages are worth about $50,000 a year, and more with sign-on bonuses, retention bonuses, or loan repayment.

Run the numbers so you know what you’re actually signing up for, and what your effective hourly rate is after taxes and everything else.

So Which One Wins?

There’s no universal answer, but there is a framework. Neither structure is superior for everyone. The right choice depends on your income, risk tolerance, financial discipline, career stage, and family needs.

1099 likely wins if:

You’re disciplined with money and will actually set up the tax and retirement infrastructure. That takes time: separate bank accounts, credit cards, and a CPA who knows what they’re doing and has worked with CRNAs.

Your rate is high enough that the tax deductions and retirement advantages outweigh the cost of replacing benefits.

You want flexibility: working locum contracts, choosing your facilities, or scaling back to 26 weeks a year without asking anyone’s permission or dropping to PRN status.

You’re comfortable with variable income, including $0 on your off weeks, and can manage cash flow through slow periods.

You have a CPA and a financial advisor, or someone who specializes in health care self-employment. You really need this, especially during setup. Even a one-time-fee advisor can get everything on the right track so it runs on autopilot from there.

W-2 likely wins if:

You value predictability and don’t want to manage quarterly taxes, business admin, or insurance shopping. If you just want everything on easy mode, there’s nothing wrong with that.

Your employer offers a strong benefits and retirement package, which closes much of the gap.

You’re a new grad building your foundation and getting your feet wet in anesthesia. W-2 takes one thing off your plate. Adding financial complexity to a new career can be overwhelming.

You’re pursuing Public Service Loan Forgiveness. PSLF requires W-2 employment at a qualifying nonprofit, and you lose it if you go 1099. I’m not a big fan of loan forgiveness programs, for several reasons. But if you have significant student loans and an income-driven repayment plan tied to W-2 employment makes the most sense for you, it’s worth choosing that structure.

The Truth About 1099 Work

Despite what the online courses try to sell you, 1099 contracting won’t make you rich by itself. With the right infrastructure and tax plan, you might pocket more at the end of the year, and maybe you go big on locum work for a while. Earning more and paying a slightly lower effective tax rate is great.

But if you don’t understand the personal finance side, you won’t get anywhere. You’ll stay stuck in a loop of living paycheck to paycheck and never see the ship move in the right direction.

And having $0 of income during an off week is a real mental hurdle. The courses advertise endless freedom and unicorn sparkles. In reality, 1099 CRNAs and locums generally work more weeks a year and take far less vacation than W-2 CRNAs, who typically get five to eight weeks of PTO, plus a CME week and maybe some sick leave. W-2 pay is spread over 26 pay periods, so there’s no mental hit from going a week without a paycheck.

I’m not knocking the 1099 courses. But the information is available without a $1,500 price tag, and I’ll keep sharing it here. In a future episode, I’ll walk through my personal 1099 setup from start to finish. Much of it is already on the blog, and I want to give you something you can simply copy. There’s no secret and no gatekeeping. I want everyone to succeed.

Your Homework…

Pull out your last pay stub or contractor invoice. Add up what you’re actually receiving, or what you’re paying for on your own, and run the comparison side by side.

If you’ve never crunched the numbers between 1099 and W-2, I promise you’ll find at least one that surprises you.

Know your:

• Gross income

• Tax rate

• Net income

• The value of your benefits package

Then divide everything by the hours you work. That gives you your effective income per hour worked, an apples-to-apples comparison between any two jobs. There are plenty of spreadsheets that walk you through it. It doesn’t take long, and you’ll know exactly where you stand.

If this helped you think differently about how you work, share it with a CRNA colleague who’s been on autopilot in a W-2 job, or one eyeing a 1099 contract without running the full math. Send questions and topic requests to blog@thefinancialcocktail.com.

I’m a CRNA, not a CPA, attorney, or financial advisor. This post is for education only and is not individualized financial, tax, or legal advice. Talk to your CPA or financial advisor before making big changes. Figures shown are for 2026.