The Rise of 1099 Side Jobs: A Guide To Thriving- Part 1

This was originally published on Dr. Incorporated May 13, 2023

Due to it’s length it will be broken down into 2 parts

25% of Doctors Are Working As Contractors

In my last post, I covered how work opportunities for doctors to work as independent contractors are growing and are fueled by the rise of location-independent jobs.

Approximately 25% of doctors work as independent contractors, meaning a quarter of them receive 1099 income. Furthermore, nearly 50% of doctors engage in some form of side work. This trend is not due to workaholism but rather reflects the changing dynamics of the physician labor market.

I spoke to a cardiology fellow recently about helping him form a professional micro-corporation as a foundation for his career. He told me his initial work plans included:

“ I plan to do remote work-reading cardiology imaging + a 0.9 FTE contractor-employment lite position with a large corporate employer—OR do the remote reading of cardiology images + a locums job. In either case, I plan to move closer to my family on the East Coast.”

What I find revealing about this is that he represents the new normal for younger doctors—their work is split among stackable options that all fuel a preferred lifestyle, and that often include some form of location-independent work. I have written about this in a prior blog post, but this is what the future looks like for most young working doctors:

A Resolve To Demand Systemic Change

One thing I particularly liked about our conversation was his determination, inspired by my best-selling book, not to sign up as a traditional employee.

Instead empowered by his own small business power, he would demand that any employer who was interested in his professional services must be willing to employ him as a contractor via an employment lite agreement.

The bottom line is that as a new attending physician—an employment lite contract rather than a traditional employment contract was a litmus test for any employer who wanted his services—if they wanted him, they would have to be willing to form a PSA contract with him through his professional micro-corporation.

In essence, he was signaling to corporate employers that a new modern physician labor model was now in play, and he was expecting to follow this path in which he controlled and defined the type of worker that he was—an employee or a contractor.

Start A Movement

I believe every doctor in America has this same power at their disposal because of your built-in small business powers, and the time has come to begin a systemic movement of change that is directed and demanded by our tribe to take back control of our professional lives.

It all begins with starting your own professional micro-corporation, and I believe if every medical resident or fellow in America did this—it would form the foundation of a national movement within the physician labor space. In fact I have identified 20 reason every resident should form a micro-corporation during their residency-and you can read that here.

If employers want our services, they must do it on our terms, not theirs.

I hope our SimpliMD community and this cardiology fellow’s story inspire the same action in you. You should demand and expect that those who employ not force you to sign up as a traditional employee, but instead afford you the professional option of traditional employment OR long term independent contracting through employment lite. I would recommend you choose the latter because of how it preserves your professional autonomy and helps you live your best professional life!

Location Independent Jobs

With the emergence of technology, you can now work remotely and provide your services more efficiently, regardless of your location. This is known as location-independent jobs, and it has become an increasingly popular way for professionals to practice their profession without being tied down to a specific physical space. You are no longer limited to working within your geographic location.

Location-independent jobs give you more control over your work and schedule. You can work flexibly from anywhere in the world, at a time that suits you and your family. You also benefit from reaching a wider audience, as you can offer your services online to customers worldwide. This type of work provides you with more career options, as you are not limited to one job or employer.

Most of your location-independent work will be carried out as an independent contractor..

Which means you are independent—autonomous and free to work when and where you want.

Independent contracting means that you are a business and will be engaging in a business to business agreements with companies that want to use your professional services. I recommend that you create a professional micro-corporation for this purpose, but acting as a sole proprietor is another business and tax code option.

The next blog post I will walk you through the basics of which business structure will be best for you.

However, I want to make sure you are aware that when you sign up for independent contracting or 1099 work, you will be required to complete an IRS Form W-9. This form provides information to your employer and the federal government about your business entity and tax classification.

You need to be prepared for this moment, but more often than not, most physicians are not.

Form W-9

Form W-9 is technically a tax form, but it also serves as a business declaration form. It helps the IRS track who is responsible for paying taxes on the income. By filling out this form, you inform the government that your employer is not withholding taxes like they do for W-2 employees. Instead, the individual designated on the form will be responsible for paying taxes on a quarterly basis. Here is what it looks like:

Many doctors filling out this form often default to selecting the box for individual/sole proprietor and using their personal social security number as the tax identification number. Your muscle memory from completing IRS Form W-4 as a traditional employee may influence your choice, as you may not have been encouraged to see yourself as a business entity. From residency to attending physician roles, most of you have only been accustomed to working as an employee—it's what you are familiar with.

Drawing from my personal experience, I understand that a lack of business knowledge can make filling out this form overwhelming, particularly with the range of business and tax options it presents. It can be confusing.

If you are not prepared, you will likely default to selecting a business structure designated as a sole proprietorship and providing your social security number. Ultimately, this initiates communication to our employer, the US Government, and your tax preparer that you have chosen to be classified as a sole proprietor. It is the default business model, and typically no one will question it, not even your accountant who files your taxes. It's the low-cost, safe choice.

That is because, using your personal tax ID and working as a sole proprietor can be significantly more advantageous than earning the same income as a W-2 worker.For the general population, this makes great financial sense as it opens the door to using Schedule C on your 1040 tax form, enabling associated business deductions on your taxes.

However, as a high earning physician, a sole proprietorship may not always be the best business and tax choice, as illustrated in this image.

Next week in part 2, I will dig deeper into which business and tax entity structure is best for you as a 1099 physician contractor. Hint: it’s best to form a professional corporation.

If you are working a 1099 side job, and wonder if you are maximizing it’s cash flow into your home- let’s talk and discover if there are any savings, tax efficiency, and investment strategies that can help you retain more of your earnings. Sign up for an inexpensive 1 on 1 personalized consultation with me here. In the process you get a free annual membership to SimpliMD worth over $2500!