Choosing Between 1099 and W2 for Your First Physician Attending Job: Why 1099 is Better

Introduction: As a medical resident transitioning to your first attending job, understanding the difference between 1099 and W2 employment is crucial. Each option has its own implications for your taxes, benefits, and financial planning. This guide explains why 1099 employment can be more advantageous and how Doc Wealth LLC can assist with tax strategies.

Understanding 1099 vs. W2

W2 Employment:

• Standard Employment: As a W2 employee, you receive a regular salary, and your employer withholds income taxes and pays a portion of your Social Security and Medicare taxes.

• Benefits: Typically includes health insurance, retirement plans, and other employer-provided benefits.

• Limited Deductions: Tax deductions are generally limited to unreimbursed employee expenses and standard deductions.

1099 Employment:

• Independent Contractor: As a 1099 contractor, you are considered self-employed. You receive your full earnings without tax withholdings.

• Higher Earnings Potential: 1099 positions often offer higher pay rates to compensate for the lack of employer-provided benefits.

• Tax Deductions: You can deduct a wide range of business expenses, significantly reducing your taxable income.

Benefits of 1099 Employment

Tax Deductions:

• Business Expenses: Deduct expenses such as medical supplies, professional dues, CME, and travel related to your work.

• Home Office Deduction: If you use part of your home for work, you can deduct a portion of your household expenses.

• Vehicle Expenses: Deduct mileage or actual vehicle expenses for business-related travel.

Retirement Savings:

• Solo 401(k) or SEP IRA: Contribute to these retirement plans to reduce your taxable income and grow your retirement savings tax-deferred.

• Higher Contribution Limits: As a self-employed individual, you can contribute more to retirement plans compared to W2 employees.

Flexibility and Control:

• Schedule: Greater control over your work schedule and the types of jobs you accept.

• Business Growth: Opportunity to grow your own practice and increase earnings potential over time.

Advanced Tax Strategies:

Real Estate Professional Status (REPS):

• Qualification: As a physician, you can qualify for REPS, allowing you to deduct real estate losses against your active income.

• Benefits: This can significantly reduce your overall tax liability and enhance your investment returns.

Cost Segregation:

• Strategy: Accelerate depreciation on real estate properties to increase your deductions in the early years of ownership.

• Benefits: This can free up capital for reinvestment and improve cash flow.

Oil and Gas Investments:

• Tax Deductions: Invest in oil and gas to take advantage of intangible drilling cost deductions and percentage depletion allowances.

• Benefits: These investments can provide substantial tax benefits and diversify your income streams.

How Doc Wealth LLC Can Help

Personalized Tax Strategy:

• Tax Planning: We help you plan and implement strategies to maximize deductions and minimize tax liabilities.

• Entity Structuring: Advising on the best business structure (e.g., LLC or S Corp) to optimize tax benefits.

• Compliance: Ensuring you meet all tax filing requirements and deadlines.

Conclusion: Choosing 1099 employment for your first attending job offers significant financial advantages through higher earnings potential and numerous tax deductions. At Doc Wealth LLC, we specialize in helping physicians navigate the complexities of 1099 employment with personalized tax strategies and financial planning. For expert guidance and customized tax strategies, contact Doc Wealth LLC today. Our team is dedicated to helping you achieve the best financial outcomes in your new role as an attending physician.

Visit us at docwealth.io to learn more. Schedule a meeting with us here.

Follow Dr. Mark Applegate on Instagram: @drmarkapplegate