I’m Betsy, Outreach Liaison for Excalibur. It’s my job to field inquiries from radiologists looking to read with us. I talk to many people that don’t know what the difference is between W2s and 1099s. (Many people do. There are lots of seasoned telerads out there that work for themselves. This article is not for you.) The terms come from the IRS forms used when it’s tax time.
Perhaps you’re already employed with a salary and benefits (that would be W2), have some extra time on your hands, and want to make a little income on the side. The second job will likely be a 1099. This article is a general introduction of the differences, not as it applies only to radiology jobs, but as a primer on the basic points that distinguish one from the other.
This is good stuff to know! It’s helpful for making informed decisions when considering job offers. It’s also good for appreciating the different ways everyone around you (not just radiologists) might earn their livelihoods.
This article is for informational purposes only, not to give advice or instructions. Consult with your accountant if you have any questions about your own situation.
W2 work and 1099 work differ in terms of employment classification and tax treatment.
W2 Work: In W2 work, an individual is considered an employee of a company. They typically have a set work schedule, receive benefits such as health insurance and retirement contributions, and are subject to company policies and management direction.
1099 Work: In 1099 work, an individual is usually classified as an independent contractor or self-employed. They have more autonomy over their work, set their own schedules, and are often responsible for their own benefits and taxes.
Employers withhold income taxes, Social Security, and Medicare taxes from the employee’s paycheck. Employees receive a W-2 form at the end of the year, summarizing their earnings and taxes withheld.
Independent contractors are responsible for calculating and paying their own income taxes, as well as self-employment taxes for Social Security and Medicare. They receive a 1099-NEC or 1099-MISC form from clients who paid them, but taxes are not withheld from payments.
That’s the very basic gist of it. It’s very important to note that the specific classification and treatment of workers can vary based on factors like local labor laws, job responsibilities, and the working relationship between the worker and the employer or client. Misclassification of workers can have legal and tax consequences, so it’s important for both parties to understand their roles and responsibilities when engaging in either W2 or 1099 work.
Benefits of 1099 work
Most people are familiar with the standard offerings of salaried employment. Without some of the perks lots of salaried positions offer, why would anyone choose 1099 work? There are potential benefits associated with 1099 work (a.k.a. independent contractor, self-employment, freelancing, side gigs, moonlighting, etc.). However, it’s important to keep in mind that these advantages can vary depending on your individual circumstances and the nature of the work.
Some benefits of 1099 work include:
Flexibility: Arguably the best benefit of all, Independent contractors often can have more control over their work schedules and can choose when and where they work, allowing for a better work-life balance.
Higher Earning Potential: Independent contractors can have the potential to earn more than salaried employees, especially if they have specialized skills in demand.
Tax Deductions: Self-employed individuals can often deduct business-related expenses, potentially reducing their taxable income. A tax accountant can help you identify your personal advantages.
Location Independence: Many independent contractor roles can be performed remotely, offering the flexibility to work from different locations or even work while traveling.
Networking Opportunities: Working with various clients and projects can lead to valuable networking opportunities and the expansion of professional connections.
Entrepreneurial Growth: Self-employment can provide a pathway to entrepreneurship and starting your own business if that’s a long-term goal.
Specialized Tax Benefits: Depending on your situation, there may be tax advantages, such as self-employed retirement plans (e.g., SEP-IRA) and healthcare expense deductions.
Customized Benefits: While you’re responsible for your benefits, you can choose healthcare, retirement, and other benefits tailored to your needs and preferences.
Skills Development: Independent contractors often need to be self-reliant and develop a wide range of skills, which can be personally and professionally fulfilling.
Diverse Experience: Working with different clients and industries can provide a rich and diverse work experience, which can be personally and professionally rewarding.
It’s important to note that 1099 work also comes with challenges, such as irregular income and the need to handle your own business operations. Additionally, the benefits of 1099 work can vary depending on factors like industry, market demand, location, and individual preferences. Carefully consider your circumstances and financial situation before pursuing 1099 work. Be aware of the potential risks and responsibilities.
For further reading about W2s or 1099s, check out these links:
Contractor or employee: Pros and cons of 1099 vs. W2 at Glassdoor.com
1099 Form: Definition, Who Gets One, How It Works at Nerdwallet.com
Radiologists: Want to read with Excalibur? Visit our careers page.