1099 Vs W2

[SlowlyButSurely]

Hi everyone!

I wanted to ask the full time 1099 workers in California here some questions:

1. Where did you get your health insurance? I called the AAPA recommended place and they are saying I could only get Covered California. Is that true? Or can I just shop commercial insurances like Aetna? Any recommendations?

2. How did you find your life and disability insurance? Any recommendations on where to shop without being taken advantage of? I had a couple of financial advisors try to rope me into plans before so I am little wary of asking them for advice.

3. I know I am responsible for:  state license, NCCPA, CME funding, DEA, possibly liability coverage, retirement, health insurance, long term and short term disability, and life insurance. Are there any other hidden expenses I am missing?

4. Overall, do you enjoy being a 1099 vs a W2? Any regrets/cons?

Thank you for your time and answers in advanced! I appreciate your insight! I have never done 1099 before and am considering it for a couple of positions and leaving my W2 position. It feels more "scary" because a lot of my friends are telling me being a 1099 employee is a mistake. However, none of them have ever been 1099 and are all W2 so I don't feel like that's a fair pool to pull from.

I hope you are all doing well and staying safe and having a wonderful week!

[rev ronin]

1. Don't want or need health insurance.  I use a faith-based medical cost sharing ministry instead, which is a fraction of the cost of insurance.

2. Select Quote for Life insurance, Unum I kept from a previous job for disability insurance. I'm paying $600 and $200/year, respectively.

3. Um, both halves of your social security payroll taxes?

4. I LOVE being a part time W-2 AND a part-time 1099, because any relevant expenses I can take off my 1099 income essentially become pre-tax.  I essentially set my own CME budget.

[cinntsp]

I'm not in California, but...

1. https://www.healthcare.gov/

2. https://www.ladderlife.com/   Feel free to look at any other major insurers.

3. Get a good CPA.  Create a spreadsheet that has all of your work expenses.  Malpractice insurance should be covered by whoever you are working for.

4. Being a 1099 employee has some great benefits, but you need to do the math to see if it makes sense.  Calculate your income tax burden including federal, state, and local taxes.  Your 1099 rate should reflect the fact that you are responsible for all of those taxes instead of an employer normally covering their half.  In general, a 1099 hourly rate should be 20-30% more than a W2 rate.  Look into a Solo(Individual) 401k for your retirement.  

Edited October 16, 2020 by cinntsp

[Boatswain2PA]

8 hours ago, SlowlyButSurely said:

Hi everyone!

I wanted to ask the full time 1099 workers in California here some questions:

1. Where did you get your health insurance? I called the AAPA recommended place and they are saying I could only get Covered California. Is that true? Or can I just shop commercial insurances like Aetna? Any recommendations?

2. How did you find your life and disability insurance? Any recommendations on where to shop without being taken advantage of? I had a couple of financial advisors try to rope me into plans before so I am little wary of asking them for advice.

3. I know I am responsible for:  state license, NCCPA, CME funding, DEA, possibly liability coverage, retirement, health insurance, long term and short term disability, and life insurance. Are there any other hidden expenses I am missing?

4. Overall, do you enjoy being a 1099 vs a W2? Any regrets/cons?

Thank you for your time and answers in advanced! I appreciate your insight! I have never done 1099 before and am considering it for a couple of positions and leaving my W2 position. It feels more "scary" because a lot of my friends are telling me being a 1099 employee is a mistake. However, none of them have ever been 1099 and are all W2 so I don't feel like that's a fair pool to pull from.

I hope you are all doing well and staying safe and having a wonderful week!

1. I am retired military so I get Tricare.  This is one of the biggest reasons 1099 was so lucrative for me (along with the Trump tax cuts).  For those who make good money, the ACA exchanges seem to be ridiculously expensive, so Rev's suggestion of a cost sharing ministry is often the best thing.  Christian Healthcare Ministries is one.

2. Life insurance I had through USAA, but improved it through Select Quote (again, like Rev suggested).  I was unable to find affordable disability insurance (despite what they promised me before getting my medical records) because I have broke so much stuff.

Most financial advisors are in it to make money for themselves and suck at it.  Most fail at it.  Just make sure YOU understand the issues around your finances and YOU make the decisions.  By your questions, I think you will do fine.

3. You forgot the BIGGEST one:  TAXES!  You will have to withhold taxes, and pay both sides of the employment taxes on the first $135K (ish) of it.  And the taxes on 1099 employees are likely going to go back up big-time with the Biden/Harris tax plan.  But I will change this around a little bit.  You and spouse want to vacation on the opposite coast.  Find a conference there.  Your travel, hotel, and reasonable expenses are tax free.  That makes vacations a little cheaper.  You can do same thing if you have a W-2 job with good CME allowances, but if you are 1099 then you set the limit (well, there ARE some.  You can't fly to Hawaii to take ACLS if the class is available in your town).  

Also, some folks will tell you that you need an LLC to work as a 1099 IC.  See other posts here, you don't.  If someone tells you that you do, ask them exactly what benefit YOU would get by operating an LLC.

4. Like everything in life there are tradeoffs.  1099 work gave me the most flexibility in how I spent my money (see vacation suggestion above).  I think the best way to do it is work part time as a 1099 so you get the spending and scheduling flexibility, and work part time as a W-2 to get additional benefits (license, etc) as well as they can cover part of the employer portion of the employment taxes.  

Final thoughts:  I'm not intimately familiar with the issue in California (haven't lived there since about 1993), but my understanding is that California recently changed a law that mostly made 1099 work invalid by requiring employers to cover 1099 workers as W-2 workers.  I know they had to go back and carve out a bunch of specific exemptions to this (otherwise companies like Uber would have had to pull out of CA), but I don't know how it would impact you.  Recommend you have a deep understanding of this.

Edited October 16, 2020 by Boatswain2PA

[virtuous woman]

2. Ask your financial advisor the following very important question:

"Do you have fiduciary responsibility to me AT ALL TIMES?"

If he/she can't say yes, move on to another advisor. Fiduciary responsibility means that the advisor is legally required to recommend products that benefit you rather than ones that benefit him or her.

[SlowlyButSurely]

Thank you all for the awesome advice! I really appreciate all of your time! Definitely gave me things to think about and to research and will guide my decision!

In regards to the taxes, I didn't write it down as I thought it was obvious . Thank you all though for not assuming and making sure I knew what I was getting into. I have spoken to my CPA and so I am estimating my wage as 30% less (which he told me is a safe over estimate).