The Pros and Cons of 1099 vs W2 Jobs for Therapists

By examining the different aspects, such as income stability, flexibility, taxation, and benefits, I aim to equip you with the knowledge necessary for making the best decision for your professional and personal growth.

Whether you are an experienced therapist or just starting your career, I will provide valuable insights to help you navigate the world of therapy. Look below for my personal experiences as a 1099 therapist working in both early intervention and then as a virtual pediatric OT (Jump to my Story).

Definition of 1099 Independent Contractor Positions

A 1099 independent contractor position refers to a type of employment arrangement where an individual works for a company or client as a contractor rather than an employee. The term “1099” refers to the tax form (Form 1099-MISC) that independent contractors receive at the end of the year to report their earnings to the Internal Revenue Service (IRS). To be classified as a 1099 independent contractor by the IRS, you must meet certain requirements:

1. Control over work: You must have the freedom to control how and when you perform your work. The client should not have direct control or supervision over your daily activities.
2. Financial control: You should have a significant investment in your tools, equipment, or facilities used to complete the work. Additionally, you should have the possibility of incurring a profit or loss based on the job's outcome.
3. Relationship type: The relationship between you and the client should be established as an independent contractor, not as an employee. There should be a written agreement outlining the nature of the relationship.
4. Multiple companies: You should work for multiple companies simultaneously or have the potential to do so. This demonstrates that you are not exclusively reliant on one client for your income.
5. Absence of employee benefits: Independent contractors are not entitled to employee benefits such as health insurance, vacation pay, or retirement plans. You are responsible for your own benefits as a self-employed individual.
6. Tax obligations: As a 1099 independent contractor, you are responsible for paying your own income taxes and self-employment taxes (Social Security and Medicare). You may need to make quarterly estimated tax payments.

It's important to note that these requirements are general guidelines, and the IRS considers various factors to determine a worker's classification but you should be meeting these requirements otherwise a company can be asked to reclassify you as an employee by the IRS.

Pros of Being a W2 Salaried Therapist

One of the major advantages of being a salaried therapist is the stability and security that comes with a regular paycheck. As a salaried employee, you can rely on a consistent income stream, which allows you to plan and budget your expenses more effectively. Additionally, salaried positions often come with benefits such as health insurance, retirement plans, and paid time off, providing a safety net for unexpected events and ensuring your overall well-being.

Another benefit of being a salaried therapist is the potential for career advancement and professional growth. Salaried positions often offer opportunities for promotions, specialized training, and continuing education, allowing you to expand your knowledge and skill set. This can lead to increased job satisfaction and higher earning potential in the long run.

Being a salaried therapist typically means having access to a supportive network of colleagues and a structured work environment. This can foster collaboration, mentorship, and professional development, enhancing your job satisfaction and overall work experience.

Cons of Being a W2 Salaried Therapist

While being a salaried therapist offers stability and benefits, there are also some drawbacks to consider. One of the main disadvantages is the potential lack of flexibility in your schedule. Salaried positions often come with set working hours and limited control over your own time. This may be challenging if you have other commitments or prefer a more flexible work-life balance.

Additionally, as a salaried therapist, you may have less control over the types of clients or cases you work with. Depending on your employer, you may be assigned to specific populations or settings, limiting your ability to explore different areas of therapy or focus on specific interests. This lack of autonomy can be a downside for those seeking variety and diversity in their work.

Lastly, it's important to consider the earning potential of a therapist salary position. As a salaried employee raises may be low or nonexistent. There may be limited opportunities for negotiation or increased compensation based on performance.

Pros of Being a 1099 Independent Contractor Therapist

One of the major advantages of being a 1099 independent contractor therapist is the freedom and flexibility to choose your clients and projects. As an independent contractor, you have the ability to work with diverse populations, explore different practice settings by working for different employers, and pursue specialized areas of interest. This can lead to a more fulfilling and varied career, allowing you to constantly learn and grow as a therapist.

Being a 1099 independent contractor allows for greater control over your work-life balance. You have the freedom to choose when and where you work, allowing you to accommodate personal commitments, pursue other interests, or simply maintain a more flexible schedule. This can be particularly beneficial for individuals who value autonomy and want to have more control over their professional and personal lives.

Cons of Being a 1099 Independent Contractor Therapist

One of the main challenges being a 1099 independent contractor is the lack of stability and predictability in income. As an independent contractor, your income may fluctuate depending on the availability of clients and projects. This can create financial uncertainty and may require careful budgeting and planning to ensure a steady stream of income.

Additionally, being a 1099 independent contractor means taking on the responsibilities of running your own business. This includes managing taxes, insurance, marketing, and other administrative tasks. These additional responsibilities can be time-consuming and may require specialized knowledge or assistance from professionals, adding to the overall complexity and workload of being an independent contractor.

Lastly, being a 1099 independent contractor can sometimes feel isolating, especially if you work independently or have limited interaction with colleagues. Unlike salaried positions, where you are part of a structured work environment, being an independent contractor may mean working alone or with limited social interaction. This lack of a support network can be a downside for those who thrive in collaborative environments or value the camaraderie of working with colleagues.

Making the Choice: Factors to Consider

When deciding between a therapist salary position and a 1099 independent contractor position, there are several factors to consider. One of the key factors is financial stability and earning potential. Salaried positions offer a consistent income stream and often come with benefits, providing a level of financial security. On the other hand, independent contractor positions offer the potential for higher earnings but come with the risk of income fluctuations and additional business expenses.

Another factor to consider is the level of control and flexibility you desire in your career. Salaried positions typically come with set working hours and limited control over your schedule and clients. If you prioritize a structured work environment and prefer a predictable routine, a therapist salary position may be a better fit. However, if you value autonomy, flexibility, and the ability to choose your clients and projects, a 1099 independent contractor position may be more suitable.

Additionally, it's important to consider your long-term career goals. Salaried positions often offer opportunities for promotions, specialized training, and continuing education, allowing you to advance in your career and expand your skill set. Independent contractor positions, on the other hand, provide the freedom to explore different practice settings, work with diverse populations, and pursue specialized areas of interest. Depending on your career aspirations, one option may align more closely with your goals.

Comparing 1099 to Part-time Hourly Positions

In addition to considering therapist salaries, it's also worth comparing 1099 independent contractor positions to part-time hourly positions. Part-time hourly positions offer a middle ground between salaried positions and independent contractor roles. These positions provide the flexibility of choosing your hours, but they are usually more set hours, with less ability to change on a weekly basis, while still offering a level of stability and benefits.

One advantage of part-time hourly positions is the ability to maintain a consistent income stream while having more control over your schedule. These positions often come with benefits such as health insurance and retirement plans, providing a level of security similar to salaried positions.

However, part-time hourly positions may have limitations in terms of autonomy compared to 1099 independent contractor positions. As an independent contractor, you have the ability to set your own rates and negotiate contracts directly with clients, potentially earning more than you would in a part-time hourly position. Additionally, being an independent contractor allows for greater control over your work-life balance and the ability to choose your clients and projects.

What to Ask When Accepting a 1099 or Hourly Position

When considering a 1099 independent contractor or hourly position, it's essential to ask the right questions about your hours to ensure that the role aligns with your needs and expectations. With both situations, it is important to understand the hours and caseload. As already discussed, 1099 are supposed to have autonomy over their caseloads and schedules. 

1. What is the expected number of hours per week or month?
2. Is there already a caseload? Or will I have to build it from scratch?
3. How is my caseload built?
4. Is there flexibility in choosing my hours, or are they set in advance?
5. Are there any specific times or days when I need to be available?
6. What about holidays? Am I expected to work or is their paid time off?
7. Will I have control over my schedule, or will it be determined by the employer or clients? 
8. Are there any requirements for on-call or weekend work?
9. Is in-direct time paid?
10. Are cancellations paid?

If you are doing home health also ask:

• What is the geographical area covered by the position?
• Will I be able to accept or decline a case?
• Is mileage reimbursed?

By asking these questions, you can gain a better understanding of the expectations and limitations of the position, allowing you to make an informed decision that aligns with your lifestyle and career goals.

My Personal Cautionary Tale of 1099 Employment

When I moved to Florida I was employed as a 1099 independent contractor for the first time. Parts of it were great.

What I enjoyed:

1. Accepting or declining cases based on any factor.
2. Making may own scheudle
3. Flexibility for reschedules
4. Writing off all equipment on taxes
5. Deducting millages on taxes

The Issues (large!) issues I encountered:

1. Never building up to the promised hours
2. Having to take clients in a large geographical area to get clients thus making much less per hour due to travel time
3. No pay for documentation or millage

The full story

When I was working as a 1099 teletherapist in 2015, I was required to be available 10 hours a week. But after 2 years I only had 5 hours on my schedule!

I heard this time and again from other therapists. Including speech-language pathologists, but it seems to be a bigger issue for occupational therapists. Just like in the school system, fewer children receive OT per school.

I tried very hard to change this and get more hours. I tried:

• Getting licensed in more states. When I left I was licensed in 4 states and working in 2
• Being available 5 days a week for the full school day

But in reality, I was working an hour here and an hour there each day and only being paid for 5 hours total a week.

2023 Let's Try it Again

This year a position fell in my lap and I decided to try again. I accepted a 10 hour a week 1099 position with no in-direct time paid and cancellations paid at half rate. The timeline is as follows:

• August 4th – hired as 1099 Contractor
• End of August Background check completed
• Mid-September started receiving assigned students
• End of October I averaged 2 students each week for a total of 1 hour and some weeks I was only paid 45 minutes due to cancellations.

The Issues this causes:

• Lack of pay
• Inconsistent pay
• Since therapy is a female-dominated field, it continues to suppress women when we accept this type of role

Real Life Example of the Issues

Survey of New Graduate Occupational Therapists

Deciding Between a Therapist Salary and a 1099 Independent Contractor Position: What's Right for You?

Ultimately, the decision between a therapist salary position and a 1099 independent contractor position depends on your individual needs, preferences, and career goals. It's important to carefully weigh the pros and cons of each option and consider factors such as financial stability, flexibility, professional growth opportunities, and work-life balance.

If you value stability, predictable income, and the benefits that come with a salaried position, a therapist salary role may be the right fit for you. On the other hand, if you prioritize autonomy, higher earning potential, and the ability to choose your clients and projects, a 1099 independent contractor position may be more suitable.

It's crucial to thoroughly research and evaluate your options, consider your long-term career aspirations, and assess your personal and financial circumstances before making a decision. Additionally, seeking advice from mentors, colleagues, or industry professionals can provide valuable insights and guidance as you navigate this important career choice.

Make the best decision for your career and future by carefully considering the pros and cons of therapist salaries and 1099 independent contractor positions. Take the time to evaluate your needs, preferences, and goals to make an informed decision that aligns with your vision for success.

Frequently Asked Questions (FAQs)