I am constantly being asked questions about pay rates for locum tenens nurse practitioners and the difference between W2 and 1099. I decided to write a post about these different pay options.
Everyone’s situation is different so I cannot say one is better than the other regarding W2 vs 1099. I do know that a lot of people automatically think W2 is better because you don’t have to worry about your taxes at the end of the year, and they provide benefits such as health insurance.
Although W2 agencies take out taxes from your paycheck and provide benefits, they tend to pay way lower than 1099 agencies. I have seen the same job being offered by a W2 agency and a 1099 agency with a $10/hour difference. When being offered health insurance, they also tend to deduct another $3/hour from your pay rate to pay for the health insurance. If you choose to pay for health insurance out-of-pocket, you typically are only spending $1/hour of your pay on private insurance, and you get to deduct it at the end of the year when filing your taxes.
Personally, I prefer 1099 because of the higher pay rate. Also, since you are technically self-employed you can deduct a lot of items that will lower your overall taxes. Based off of experience, I think the mixture of working with some W2 agencies and some 1099 agencies is optimal. The reason for this is because the taxes taken out with the W2 position, and owed with the 1099 position will often balance each other out.
I do not choose an agency based off of pay type, instead I choose an agency based off of the job options they can present to me. I usually narrow it down to a handful of agencies, and choose the best job from there, despite them being W2/1099.
Thoughts about tax time though?? Do you have to pay a lot at tax time I heard they tack on an extra 15% self employed tax for the 1099 jobs!
Yes but at the same time you have way more deductions up to 50%. That’s why I recommend doing a variety of working with both types of agencies
Yes you pay about 15% self employment tax
Great topic and one many NPs aren’t even aware requires consideration. 🙁
I have worked both and don’t really have a preference although like Kate mentioned I absolutely insist on a minimum of 15% higher rate when I do 1099. I wish that was included in the original article. I do that because I’m paying the full boat on FICA and while the deductions are appreciated they don’t negate the fact that the employer is getting off lighter by doing a 1099. As for paying taxes on the front end or back end I actually loathe the thought that anyone is holding my money interest free and I’m never so strapped that I can’t pay so prefer to pay later if I can.
Yeah good point, that’s usually the case in which 1099 agencies will pay 15% more per hour.