Hey, Sharon, good afternoon, how are you? I'm good, looking forward to this. Yeah, yeah, me too, along with our sessions. And today we're gonna be talking about something that I get questions about this all the time. I remember when you transitioned, this was a big step and we had to work through these numbers. Yes, we did. And I love how you lay all of this out. So I can't wait for you to get started on it because I think once CRNA see this, it helps a lot in the decision-making process. Yeah, so the big question is, how much do I need to earn 1099 as compared to W-2? And Sharon, there's a lot that goes into this calculation. Today, we're gonna kind of do a brief calculation. We're not gonna do the full one that we would typically do for clients, but we'll talk about what goes into it, why it's important. And it really does help make that decision because you've gotta add things such as benefits and FICA cost and opportunity costs and so forth in there. So some of this is quantitative and some of it is subjective but it is a question that everybody who goes 1099 has to answer at some point in order to make the right decision for them and their family. We'll jump in. So let's take a look here. We'll just kind of talk through the basics of this. And the first thing you've gotta do is you've gotta be able to calculate an hourly equivalent rate. What I mean by that is your W-2, right? You're working at the hospital. You're making, as the slide says here, $103 an hour which is about $215,000 a year. But that's not all you're making. You've gotta add all the other benefits and so forth in there. So let's say you've got a 401k or 403 match at 4%. So that comes up to around $8,000 for round numbers. And you're working 2,080 hours a year. Now that's 52 weeks times 40 hours is 2,080. So that's a full year of work. Okay. We've gotta equate this back to an hourly equivalent. So if you take that $8,000 and you divide that by 2,080 hours a year, the hourly equivalent for that 401k or 403 match is $3.85 an hour. Okay. You following me on that? I got it, I got it. So then we just break down all the benefits. Think about the benefits that you get being W-2. You might get that retirement match, right? What about health insurance? Are they subsidizing the cost of your health insurance? Most times, yes. They're usually covering the cost of the employee. And sometimes they subsidize the cost for family coverage or spouse coverage as well. So we've gotta know what those numbers are. We've gotta know what the hospital is paying for us. And if we had to take that all to ourself, what is that gonna be worth? So in this case, the hospital was paying about $600 a month or $7,200 a year for this CRNA's health insurance. So we go through the same process, 7,200 divided by 2,080 hours a year, that's worth $3.46 an hour. Next benefit, disability insurance. Disability insurance runs about $1,800 a year. They're furnishing the CRNA with this. That's the cost. Again, divided by 2,080, that's 87 cents an hour. Malpractice, what does that malpractice run? $2,800 a year divided by 2,080 gives you $1.35. And don't forget, you also get PTO. How much PTO are you getting? In this case, they were giving them three weeks. That was worth $12,360. So $5.94 an hour. Now, this is a real example that you have had before. Am I correct? It is. Okay. Because three weeks seems like low for me for PTO. Yep, yep. This was a newer grad who was just starting in comparison. But it can be a lot more benefits than this for sure. Education money, which a lot of places aren't giving anymore, places are. You've got to factor that in. The other thing you've got to factor in is the FICA match. I'm going to break that down in just a minute for what that is. But in this case, it was worth $12,238 or about 5.88 an hour. So when you take all that together, then that W-2 position is worth $124.65 an hour. So when we go out to the marketplace, we now know what this position is worth. All the benefits, everything included, that's what that position is worth. So that's what you've got to do first. Then on the flip side of that, we've got to say, okay, well, if I'm going to go out to the marketplace and I've got to pay my own insurance, let's say they're paying me $200 an hour, well, what is that going to run me? Is it going to be $600 a month? You wish. I mean, depending on your age and which plan you pick and so forth. All right now, be careful. Your disability insurance, what that's going to run you, it's not going to be $1,800 a year. It's going to be more expensive than that. Because you're going to get an individual policy instead of a group policy. It's probably going to have more benefits associated with it. So we've got to get that cost. We contact A&A Insurance Services and what is malpractice going to cost us? How much time off do we want to take? Because you've got to compare apples to apples. Let's just say you take three weeks off. So three weeks off at $200 a week, well, excuse me, an hour, $8,000 a week, that's $24,000. So, and then you're fined $1,800 a year. So, and then your FICA match, which has got to be virtually the same here. So once you know what you're making W-2, you then need to break down what the additional costs are going to be by going 1099. You've got to say you're making $200 an hour. All right, well, if that 401k, 403b match is worth 385, are you going to be able to set up a retirement plan and match yourself? Absolutely. So we don't need to put that in the equation because that's your money going from the left pocket to the right pocket, right? It's not going out, it's going to your pocket. That health insurance cost though is going to be a definite cost. So we're going to have to break that down and say, what's that hourly equivalent of that health insurance due in 1099? Disability, malpractice, FICA, all those things that go into that. You're also going to have to add, you're going to have additional costs associated with accounting because now, unless you're going to do all the stuff yourself, you're going to have to hire somebody to do that for you. They're going to have to do your bookkeeping. You're going to have additional tax returns to do. There are additional costs associated with being 1099. You break that down to the hourly equivalent and let's say here $125 an hour. And when we go 1099, after all our additional expenses, we're still making 170 an hour. Which one's better, Sharon? Oh, well, I would say that 170 is better than 125. Exactly. But you know, a lot of people don't break it down this way. They just see that higher hourly rate and they think, oh, well, that's better. Give you an example, I had a CR&AD the other day who was making 150, 1099. And I started going through the numbers with him and I told him, I said, at 150, based upon what the going rate is, you're better off being W-2. It's costing you more money to be 1099 than it is if you were W-2. Why would you do that? Well, you know, on the opposite end of this, if you are the same, sometimes just having the control is better. And that's a decision that everybody has to make for themselves. And in his case, it was, but I feel like he's being a little underpaid and it was an opportunity for me to point out to him that most CRNAs right now are making at least $200 an hour, 1099. Maybe you need to go back and say, I need to renegotiate this or find another position that would pay you better than what you are. So again, understanding this stuff and making sure that you're calculating every single one of these values. What is this W-2 position worth to me? What is this 1099 position worth to me? And then adding in those outside values, such as control, working when I want to, taking vacation when I want to, and then you can start to really compare apples to apples. But you've got to delve in at the numerical level and break this down to see if it makes financial sense for you. In most cases, it does. In that client's case the other day, sharing at 150 an hour, it didn't make a whole lot of financial sense. But to your point, it might make sense because they're maintaining control, they're working when they want to, and you've got some of these other intrinsic values out there that can make a big difference. So that's number one. The other thing you've got to understand, and I alluded to this a minute ago, is this FICA match, because that's a big deal. I mean, you look at the numbers here, that's as big a deal as their vacation pay, right? Let's kind of break that down. We'll go into this a little later in another section, but because we're talking about it here, I want you to understand that. So if you're a W-2 employee, remember your employer matches your FICA tax. So you pay half of it, and they pay half of it. So in this case, you're a W-2 employee, let's say you have $160,000 salary. There's a reason I'm comparing $160,000 here, just to compare apples to apples. But typically it would be higher than this. Obviously we know. Your Medicare costs 1.45%, your social security 6.2. So out of your pocket, Sharon, you're going to pay $12,240. Now, if you're a 1099, remember you're paying both sides. So you flip that up and you're paying $24,480, right? Right. And you're saying, and why does this make sense? Well, there's gotta be more to it than this, and there is, but there is an extra cost associated with that. And we've got to factor that extra cost into our decision-making when we go 1099. So that means that $200 an hour now became $194.12 or something, whatever that number was. I think it was 588. So that alone has to lower that rate. And then everything else goes into that. And then you look at it and say, okay, well, I'm still making more money. And are there tax benefits associated with this? Potentially, we'll get to that in another section. Are there control issues that come into this? Again, remember our favorite word for CRNA is control. Are there flexibility options that come into this? Absolutely. And then down at the bottom, the portion that you pay as the employer, same thing your employer at the hospital or your W-2 position is doing, they're paying that for you. So what are they doing, Sharon? They're writing it off. They're taking a tax deduction for it. That's exactly right. So you're gonna do the same thing from your business side. So therefore that $24,480, if you're in the 32% bracket, it costs you $20,563 or a little over $8,000 more in additional taxes. Like I said earlier, there's gotta be a reason to make sure that this works for you. And the first thing is being able to quantify what each position is worth and then breaking it down and say, okay, I've got the numbers. Now, what are the other things that go around that?

financial considerations

W-2 employee

1099 contractor

hourly rates

tax implications