I’m a gastroenterology physician starting a new position in a few months. My salary will be $600,000 per year. The position is an employed one within a hospital system. The position has a 401K plan, health insurance with HSA option, and I would receive malpractice insurance through the employer.
Do you think it would be better for me/make sense to ask the employer if it would be possible for me to be paid as a 1099 independent contractor, and then obtain my own health insurance (family of 4), medical malpractice insurance, ect. If they agreed, should I ask for more than the $600,000 salary given the employer would be saving money by not providing benefits?
If you recommend 1099 over W2 and they agree, should I form an S-Corp to save on FICA?
As an aside, I do already have my own solo 401K with about 50K per year in 1099 income from a side hustle.
Very interesting question. I look forward to Matt & Mark’s reply. I definitely would ask for more compensation if it is wise to go the 1099 approach. The worst case scenario is they say no. Always ask for more money! You can get quotes for the health insurance today on your own as well as the malpractice insurance to see what that costs. Granted the hospital’s per person cost is lower since they are group buying (for both the health and malpractice) versus your smaller account but it will help you put a value on those things to negotiate with the hospital for more pay.
I got “small group” health insurance with a husband/wife LLC by filing as a partnership as a partnership was the threshold for getting access to the better policy as a small group. Look into that option as well - your wife can be the other part of your partnership if that strategy helps.
The classification of a worker as an employee (W-2) vs. an independent contractor (1099) is more of a legal question than a financial/tax question. If you are doing the same work under the same relationship as W-2 employees at the hospital, the hospital is probably legally bound to classify and pay you as a W-2 employee.
They can’t classify you as an independent contractor just because you want them to do it that way. As the adage goes, “if it quacks like a duck, it’s a duck.” Let us know what options they give you.
@cleonI think has this right. Companies can get in trouble for trying to treat employees like contractors, especially if they provide all the employee benefits you mentioned to their bona fide employees. That said, I have friends in specialized healthcare that have contractor arrangements with the hospitals they work in, so the details will matter. If the company sets the expectations of when, where, how, and how much you work, and those expectations are similar to their bona fide employees, then they likely won’t be able to bring you on as 1099. You’d need to negotiate to have different enough terms that you actually do look distinctly like a contractor compared to employees.