FAQs: Locums/1099
Frequently asked locum and 1099 content follows:
1099 and locum are not the same.
Some 1099 positions are essentially employed CRNAs being paid as independent contractors. Something like $325,000 1099 with 8 weeks off. You are contracting 44 weeks with a required 40 hours per week. There are likely restrictions as to when you can take the 8 weeks off. You need to plan personal time in advance, just like when you were an employee. Not everyone in the group can have the same weeks off. These positions don’t have paid travel and lodging. Advantage – 1099 and perceived stability. Disadvantage – Not a locum.
Locum 1099 work is where a facility is short staffed for one reason or another. I attempt to make the full time CRNAs job suck a bit less. Great jobs with a great culture in a great location don’t use locums. Advantage – Highest pay package. Disadvantage – Instability because hogs get slaughtered.
Is locum work worth it?
It’s worth it for me. Locum work maximizes the value of my time. I'm giving the same anesthetics as most CRNAs but being paid far more. Facilities might be looking for locum coverage for one of many reasons. I have found success filling roles related to contract turnover and undesirable geographic location. The combination of high hourly rates plus paid travel and lodging compliments my FI journey.
This work is not without its disadvantages. It often requires significant travel and time away from home. We travel as a family which presents its own set of complications. Setting your own schedule sounds desirable until you struggle filling weeks. There's something to be said about having work.
I will remaining the locum pool for the foreseeable future.
Do I need an LLC for 1099 work?
No. Most CRNAs would do just fine as a sole provider. Litigation is a major concern here. Malpractice litigation is a personal lawsuit meaning the lawsuit is against you as a provider, not your company. An LLC will not provide any additional coverage.
Sole proprietorship still allows business deductions, insurance coverage, solo401(k)s, etc. without the increased costs and complexities of a small business. Don’t start an LLC just to say you have one.
I have an LLC that files as an S-Corp for 2 reasons. Firstly, Mrs. TFC also works for the LLC and does not have outside employment. This allows her to contribute to a Solo401(k). This gives us mad retirement contribution limits.
Secondly, we travel nationally. Most marketplace health insurance options are limited geographically. This means we will be out-of-network many of the places we cover. Having an LLC with 2 employees allows us a national insurance provider such as Blue Cross Blue Shield.
Check your Secretary of State website for recommendations.
How much more do I need to get paid as 1099 versus W2?
Generally, 20-30% more. The true answer depends on a few considerations.
Look at your w-2 benefits and assign them a value -- Commonly $40,000-$50,0000. Health insurance, retirement match, time off, CME, PTO/sick leave, etc. This brings a $250,000 job to a $300,000 total comp package.
$250,000 × 1.25 = $312,500 1099 Equivalent
As a locum, I have fixed expenses meaning the more I earn, the lower the percentage difference. My health insurance costs $30,000 regardless of earning $100,000 or $1M. If I was W-2, my employer would cover 80% of my health insurance premiums. Most of my variable expenses such as travel and lodging are reimbursed through the job.
As a locum, I earn more, paya lower effective tax rate, live with pretax dollars, have more headaches, and ultimately come out ahead financially.
How do I take money out of the company?
Pay yourself monthly. Take distributions quarterly.
Side note: I have an automatic payroll service through QuickBooks that cuts Mrs. TFC and I a check every month, then QuickBooks sends $4,000 to the federal government.
How do I fund my Solo401(k)?
I use a third party hosted at Fidelity. I write 6 checks:
2 EmployEE Contribution
2 EmployER Contribution
2 After-Tax Contribution
I’ll split $144,000 between six checks in April after taxes are done. It’s annoying and dated, but leaves a paper trail for my records. There are other ways to send money, but this is how I do it.
How much of my income do I need to set aside for taxes?
30-40% is a good starting point. I say starting point because it’s better to have an excess reserve than fall short – especially when starting out. High tax states should lean towards the 40% side.
Other considerations are your traditional vs Roth contributions, business expenses, QBI deduction eligibility, etc. Most 1099 folks are probably paying a 20-25% effective tax rate.
When to pay taxes?
You will have quarterly tax payments to the fed and the states you worked. My CPA gives me quarterly tax estimates based on previous and expected earnings. Mrs. TFC cuts a check when the time comes.
What if I work in different states?
Income is taxed in the state it was earned. My work in Minnesota, Nebraska, and South Dakota is taxed very differently. Two of the three will receive quarterly state income tax estimates that come from my CPA. Some CPAs will bypass quarterly state income tax in favor of paying annually.
Can I “write off” [insert expense here]?
Many folks ask about various expenses. According to David, I can just… “write it off.” This is true. Anything CAN be classified as a business expense. Should an audit arise, the IRS agent will only accept “ordinary and necessary” expenses as valid.
It’s my responsibility to file my taxes thus telling the government how much I owe them. It’s my responsibility to sift through thousands of pages of tax code. The government audits my tax return to determine if I did their job well enough to avoid penalty.
Unfortunately, most CRNAs are limited to health insurance premiums, travel, lodging, licensure, etc. David’s skin care products aren’t “ordinary and necessary” to giving anesthesia.
There are many ways to structure a 1099 position. There is more under the “1099” tab. Hopefully this clarifies some of the basics. Online course is available for anyone interested. Thanks for reading!
