Decoding the 1099 Puzzle: A Blueprint for Finding Financial Independence

This post was originally published in Dr. Incorporated March 13, 2023

Ever wondered what the term "1099" really means in the world of physicians? In this blog post, I will unravel the intricacies of being a "1099 employee" and explore how this unique employment model, particularly under SimpliMD's employment lite contracts, provides physicians with unprecedented control over their professional lives. From tax advantages to maintaining autonomy, discover why the concept of a "1099 Physician Employee" is reshaping the landscape for doctors seeking financial freedom.

What is 1099?

To summarize briefly, a 1099 form is used to report non-employee pay to the IRS and differs from a W-2 form, which is for reporting income paid to employees. Specifically, a 1099-NEC form is utilized to report payments made to non-employees, such as independent contractors and other businesses.

If you receive a 1099 form from your employer, it indicates that your employer views you as an independent contractor rather than an employee. However, workplaces are not the only entities that may send you a 1099 form.

What Does a “1099 Employee” Mean?

The modern term "1099 employee" is essentially an oxymoron because 1099 income is by definition non-employee compensation. Therefore, from a tax code and labor law standpoint, it is not possible to be an employed person who receives income as a 1099.

The fact is that there are thousands, if not millions, of workers in the US who would consider themselves “1099 employees.” This includes me, under an employment lite contract that I have extensively written about on this blog as a better model than traditional employment for physicians.

I talk about 1099 employment in my post Embracing Independence and Financial Freedom with 1099 Employment

How did the concept and terminology of physicians as "1099 Employees" come about?

The 1099 Employee Physician

Physician employers are increasingly categorizing all physician labor as non-permanent, incorporating 90-day no-cause termination clauses into contracts. This classification as non-permanent workers puts both you and the employing corporation in a position to treat your compensation as 1099 income rather than W-2 income.

You should closely observe this emerging new space for physician workers as it offers a stronger foundation for maintaining your professional autonomy compared to traditional employment.

However, it's important to note that employers are hesitant to relinquish the structure of traditional employment for physicians. For them, it's a matter of control. They are hesitant to surrender their control over your professional services as an employee, which is what they pay for when they offer you an employment contract filled with financial incentives. While they may not care much about you personally, they are keen on controlling all the business that comes through your professional work. Unlike their regular employees, they are concerned that contracting work may result in a loss of your time, energy, and business revenue to other opportunities. By designating you as an employee and imposing non-compete and restrictive covenant clauses in your contract, they are able to exert almost total control over you and your professional work..

Therefore, while classifying you as a contractor offers them numerous advantages, they are still concerned that this classification could result in a loss of their financial gains compared to employing you. You are a revenue-producing machine for them, and they want to harness all of your energy for their benefit.

They are not concerned about this with other gig workers or contractors because they do not generate business revenue like you. You are special and unlike any other workers in their employment network. You are a unique business engine for these corporations, driving revenue through their enterprise not only with patient encounters but also through three separate channels as noted below:

1099 = Loss of Control For Employers

The term "1099 employee" typically refers to a self-employed individual who is independent. Employers aim to steer clear of this independence, particularly for doctors, as it allows you to have business-to-business relationships with others, which they prefer to avoid, especially with their competitors.

However, independence is a critical foundation for your well-being as a doctor because it helps preserve your professional autonomy. This is one of the most important ways you can prevent burnout in your life.

Now is the time for you to seize this moment as the traditional worker classifications of employees and independent contractors have evolved to include the "1099 employee" category for physician labor.

The 1099 Physician Employee

The long-term independent contracting classification is a newer job space for physicians, where you can be legitimately referred to as a "1099 employee" for large corporations.

It reflects the needs of both parties in today's economy.

Doctors require autonomy and control over their personal and professional lives, while corporate employers need both short-term and long-term physician labor to reliably meet their service line needs in a closely aligned manner.

Traditional employment remains a foundational component for physician labor, but progressive options like "1099 employment" are a necessary addition to the labor space because they allow both parties to flourish..

The Better Physician Employment Model

1099 employees are independent contractors who provide services to multiple clients or companies, rather than being employed by a single company. As a physician, you are one of the most common types of 1099 employees. This structure is gaining popularity within our tribe because it offers more control over your work schedule. This flexibility enables you to pursue your passions both within and outside of medicine.

Some of you may find it strange to refer to yourself as a contractor, as it may be more convenient to simply label yourself as an "employee" based on your anticipated tenure at a job, your alignment with the corporation, or your loyalty to their brand. This was the path I chose during my personal transition from full-time employment to a employment lite model 10 years ago. At the time I transitioned from an employee to a contractor working for the same hospital, performing the same job at the same location. This made it easier for others to perceive me as the same employee I had always been, while unbeknownst to them, my business structure and cash flow with my 1099 income were significantly different from my W-2 income.

Benefits Both Doctor & Employer

The 1099 employment structure is beneficial to both you and your employer especially when it is configured through an employment lite agreement. Take a look at this list describes how this truly is a win-win job structure for both sides.

For high-income earners like you, choosing to be a 1099 employee can lead to tax advantages that far exceed those of a W-2 physician.

For this reason alone, an increasing number of doctors are opting to become 1099 employees rather than traditional W2 employees.

If you are currently doing any type of 1099 work, or if you are considering transitioning to an employment lite contract, please contact me for a business consultation and find how a micro-corporation can benefit you. The $99 business consultation will be well worth it and could save you thousands in taxes.