W-2 versus 1099 Status: Which should you choose for Physicians?

When getting hired for a locum tenens position, you may have an option to work as a W-2 employee or a 1099 employee. What is a W2 form and a 1099 form anyway? Should you be a salaried employee or an independent contractor? What are the differences, and which is better? Let’s go over the benefits and responsibilities of both so you can make an informed decision.

Locum Tenens: 1099 Form

Most providers have worked a locum tenens position in their career and had to sign a 1099 form.  Being a 1099 worker means that you are an independent contractor. You are self-employed and not an employee of the healthcare organization. You sign a contract with the locum company to complete specific duties and fill a particular role. You can be free to set your own hours depending on the shifts available and are generally able to pick up extra shifts if available. You usually can work for multiple hospitals or clinics unless you sign a non-compete clause that prevents this.

Because you are self-employed, you have no State, Federal, Medicare, or Social Security taxes withheld on your locum tenens earnings. Paying taxes is your responsibility. If you work in multiple states, you will be responsible for each state’s taxes.  There is a state tax credit for non-residents that your CPA can advise you on.  You also have no employee benefits or insurance from the hospital that it may offer to its own employees.

Locum tenens companies will cover the medical malpractice insurance for their contractors.  Check with your locum company to ensure that you are covered appropriately, as not all locum companies’ malpractice coverage is the same.

This is a great way to be free to pursue as much work as you like and be able to take vacations when you want.

W-2 Form as a Salaried Physician

As a W-2 employee, you undertake an employment agreement as a salaried physician. The healthcare organization automatically withholds taxes, Medicare, and social security. They have direct control of your working hours and typically require you to work at their hospital locations. You are eligible for employee benefits and are covered by the hospital’s malpractice insurance.

This type of employment gives you more security with a steady salary and a focus on the work instead of finding shifts.

Healthcare organizations may employ both types of workers in their hospitals. If your specialty allows you to work in either capacity, you can decide what works best for you. Both have advantages and disadvantages that need to be considered, but having the option is liberating.

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