The Pros and Cons of Working As a 1099 Physician

Thinking about hanging out your shingle? Maybe you don’t know how to make that career transition from W2 to a 1099 Independent Contractor. But the truth is, the change could have positive outcomes – for physicians who are ready for it.

Scott Carollo, MD, an Interventional Cardiologist in Omaha, Nebraska, made the switch about a year ago from W2 to 1099 work. He now refers to himself as a “consultant” and is enjoying the freedom his new lifestyle provides him.

“I’d been in practice for 28 years,” Dr. Carollo said. “The first major segment of my career was in private practice, [then for a corporate environment], and then I made the move over to self-employed status.”

Now, Carollo enjoys coming into work situations where the environment is one of excitement and welcome because he’s the person they need to help out in a jam.

“VitalSolution has been a game changer for me,” he said. [I have] “a lot more independence, my schedule is way friendlier, and the environment is way more supportive.”

“When you go to a place where there’s a need (and most 1099ers are in that position) they’re excited as heck to have you,” he added.

How Does Work Change for Cardiologists Who Become Contractors?

Some might not see a difference, at least when it comes to the types of work they’re called in to do. For Dr. Carollo, it was more of a mental upgrade.

“I feel like more of a utility, rather than a position player,” Dr. Carollo said. “I do about the same kinds of work, I used to do side work for medical witness testimony before. But now I do that as an LLC.”

“Opportunities for side work have increased,” he said. “I put out my shingle and I can do all the kinds of things I like to do.”

Should You Create an LLC?

Contractors on 1099 status may want to consult a financial advisor about whether or not becoming an LLC – a limited liability company – is the right move for them.

According to the Small Business Administration, LLC’s “can be a good choice for medium- or higher-risk businesses, owners with significant personal assets they want protected, and owners who want to pay a lower tax rate than they would with a corporation.”

For Dr. Carollo, it made the most sense for a variety of reasons, some of which were just practical, like how to organize his income streams or at tax time.

“Even though I’m contracted with VitalSolution, I’m still an independent contractor. I created my own LLC for the business side of things,” Dr. Carollo said. “And it’s a process which can be intimidating. The process and paperwork is fairly straightforward, but it’s important to talk to experts.”

“I’m not a business guy,” he said. “I don’t have any background in that – so I looked around for resources.”

Luckily, there are companies that specifically can help 1099’ers with issues around their business, taxes, and even with their retirement accounts.

How to Manage the Big Change to 1099 Status

Besides considering the benefits, like a freer schedule or more work variety, an independent contractor physician also needs to make sure they’re covering the business and financial end of work that a previous employer managed, like healthcare and retirement.

It’s key to make sure that you’re taking care of your own health – both medical and financial. As an independent contractor, there are options for medical healthcare coverage that you’ll need to set up for yourself. But there are lots to consider:

• You could join your partner or spouse’s employer-sponsored benefits plan
• You could pay COBRA insurance premiums from your past W2 job while you transition
• Use HealthCare.gov (i.e., the ACA) to enroll in an insurance plan
• Check with professional associations, such as the American Medical Association or National Association for the Self-Employed for coverage options
• And even talk to a local independent insurance broker to discuss your coverage options

For retirement, you can use a financial planner to help or manage your own 401(k) into a Rollover account that you can effectively manage on your own. An accountant or tax advisor can help you decide how much you should deposit into retirement each year.

How Can You Better Prepare for Taxes as an Independent Contractor?

One easy way to stress less is to make sure you start off on the right foot. As you make the transition from W2 to 1099 status, have an accountant or tax advisor ready to help you stay organized. As Dr. Carollo points out, you can tap colleagues who have been down that same road for great advice.

“You can look for help online, but it’s tough because the internet has a ton of information,” Dr. Carollo said. “A great way to do it is to talk to a colleague and get a referral. Talk to people in the same [type of position you’re in] about how they made it work.

You could ask, “Hey how are you [making 1099 work a good fit] and who did you find to help you with the business or tax side of it?

“There’s so much stress when you make this jump – I just don’t think making that big leap into it and just hoping it’s all going to work out is the way to go,” Dr. Carollo added. “It’s not about making a leap, it’s about leaning into it.”

And you don’t have to just ask for the good stories! Talk to colleagues about pitfalls or what didn’t work for them. The internet can also offer up tales of mistakes that you can learn from, instead of repeating!

Get Help From 1099 Tax Doctor!

Eric Wright, MD, owner of 1099 Tax Doctor, answers all the most common questions about working as a 1099 physician, which can help make your transition to 1099 status easier – not just around tax time, but all year long! You can make your work-life balance easier by not having to stress about your taxes or your finances.