I've been approached by several W-2 and 1099 Locum CRNAs and many ask what the difference is. Tom is a wealth of information and his podcast and professional speaking on these topics are highly applicable to our business. Now for Tom's article for LocumCRNA.com! Thank you, Tom!
By Tom Wheelwright
Life as a traveling medical professional can be costly if you don’t have the right tax strategy. Locum Professionals, who temporarily take over when others are sick, unavailable or out on maternity leave, tend to be set up as a 1099 contractor. For all Locum Nurses and Physicians, it’s especially important to understand the differences between being taxed a 1099 independent contractor versus a W-2 employee to keep more money in your pockets.
1099 vs W-2
Generally, tax reduction opportunities are much greater with 1099 income versus W-2 income. However, if you're not careful, the 1099 income can be taxed even higher than the W-2 income.
Traveling physicians should do all they can to make sure they are independent contractors (1099) due to the much greater tax benefits of owning a business (1099) versus being an employee (W-2). For 1099 contractors, travel is 100 percent tax-deductible if you spend more than 50 percent of your day four-plus hours - working while you’re on the road.
New Tax Law Impacts
With the new Tax Cuts and Jobs Act of 2017, this tax question is even more important. After reading the entire new tax plan of over 1,000 pages three times, there are important things to note.
If you’re set up as sole proprietor or S Corp, you may be able to take a 20% deduction on the net income from your business. Professional service companies, like doctors, lawyers and accountants (though not engineers or architects), business will only get the full 20% deduction if their taxable income is less than $157,500 ($315,000 on a joint return).
Bottom line, a good tax strategy for 1099 or W-2 income should always be developed with a great Tax Advisor to ensure long-term and permanent tax reductions.
And for more information about the new tax plan impacts, read our newly released Tax-Free Wealth2ndEdition (August 2018).
About The Author: Tom Wheelwright is a Best-Selling Author (Tax-Free Wealth 2ndEdition, 2018), CPA and CEO of WealthAbility, which assists small businesses and entrepreneurs with tax and wealth strategies, and Host of The WealthAbility Show with Tom Wheelwright CPA Podcast. http://wealthability.com
LINK To Tom Wheelwright’s new 2018 book