This is educational content based on my own research, not tax, legal or financial advice. Tax rules change and every situation is different, so work with a CPA before making decisions. Figures are for the 2026 tax year.
Going 1099 changes everything about how you get paid. As a W-2 employee, your employer withholds taxes, pays half your Social Security and Medicare, carries your malpractice and hands you a 401(k). As an independent contractor, you’re a business, and all of that becomes your job.
The upside is real: higher rates, control over your schedule and bigger retirement contributions. But the providers who get burned are usually the ones who didn’t set things up right in the first few months. This guide walks through what to handle, in order.
The quick checklist
- Get an EIN from the IRS (free).
- Decide whether to form an LLC.
- Open a separate business bank account.
- Set up bookkeeping software.
- Set aside money for taxes from every payment.
- Pay estimated taxes four times a year.
- Lock in malpractice insurance, and know who pays for tail coverage.
- Get your own disability and health insurance.
- Open a Solo 401(k) or SEP IRA.
- Find a CPA who works with independent clinicians.
1. Set up the business
Get an EIN. An Employer Identification Number is a free tax ID from the IRS. It lets you give facilities and agencies a business number instead of your Social Security number. You can apply online at IRS.gov in a few minutes.
Consider an LLC. A limited liability company is formed through your state and can help separate your business from your personal finances. It doesn’t replace malpractice insurance, and fees and rules vary by state, so ask your CPA or an attorney whether it makes sense for you.
Open a separate bank account. Run every contract payment and business expense through it. It makes bookkeeping and taxes far easier, and it keeps your records clean if you’re ever audited.
2. Understand self-employment tax
This is the part that surprises most new 1099 providers. As an employee, you and your employer split Social Security and Medicare taxes. As a contractor, you pay both halves yourself. That’s called self-employment tax, and it’s on top of regular income tax.
| Tax | 2026 rate | Applies to |
|---|---|---|
| Social Security | 12.4% | Net self-employment earnings up to $184,500 |
| Medicare | 2.9% | All net self-employment earnings |
| Additional Medicare | 0.9% | Earnings above $200,000 ($250,000 married filing jointly) |
Together, that’s 15.3% on most of your income before federal and state income tax even start. The good news: you can deduct half of your self-employment tax when calculating your income tax.
3. Pay estimated taxes every quarter
No one is withholding taxes from your 1099 checks, so the IRS expects you to pay throughout the year. If you expect to owe $1,000 or more when you file, you generally need to make estimated payments using Form 1040-ES.
| Payment | Covers income earned | Due date |
|---|---|---|
| 1st quarter | Jan 1 – Mar 31, 2026 | April 15, 2026 |
| 2nd quarter | Apr 1 – May 31, 2026 | June 15, 2026 |
| 3rd quarter | Jun 1 – Aug 31, 2026 | September 15, 2026 |
| 4th quarter | Sep 1 – Dec 31, 2026 | January 15, 2027 |
How to avoid penalties: the IRS safe harbor rules say you generally won’t owe an underpayment penalty if you pay at least 90% of this year’s tax, or 100% of last year’s tax (110% if last year’s adjusted gross income was over $150,000). Many new contractors use last year’s return as their target because it’s a known number.
Make it automatic: move a fixed percentage of every payment into a separate tax savings account the day it arrives. Ask your CPA what percentage fits your income and state.
4. Track your deductions
As a business, you can deduct ordinary and necessary business expenses. Common ones for independent anesthesia providers include:
- Continuing education courses, conferences and related travel
- License renewals, certification and recertification fees
- Professional association dues
- Malpractice insurance premiums you pay yourself
- Work equipment and gear, like a stethoscope or loupes, used for work
- Travel between work sites and travel for out-of-town contracts (not your regular commute)
- Accounting software and CPA fees
- Health insurance premiums, through the self-employed health insurance deduction if you qualify
- A home office, if it meets the IRS rules for regular and exclusive business use
Keep receipts for everything, and snap photos of paper ones. Your bookkeeping software can do most of the categorizing for you.
5. Get the right insurance
Malpractice
Before you sign any contract, confirm who provides malpractice coverage and what kind it is:
- Occurrence coverage covers incidents that happen while the policy is active, even if the claim is filed years later.
- Claims-made coverage only covers claims filed while the policy is active. When it ends, you need tail coverage to stay protected, and tail can be expensive.
- Get it in writing: who pays the premium, the coverage limits, and who pays for tail if the contract ends.
Disability
Your ability to work is your biggest financial asset, and as a contractor there’s no employer disability plan behind you. Many clinicians look for an “own-occupation” policy, which pays if you can’t work as a CRNA specifically, even if you could do other work.
Health
Without an employer plan, you’ll need your own coverage through a spouse’s plan, the Health Insurance Marketplace or a private plan. If you’re eligible, a high-deductible plan paired with a health savings account (HSA) can add another tax-advantaged way to save.
6. Set up retirement savings
This is where 1099 work can really pay off. Self-employed providers can put away far more than most employees.
| Account | 2026 limit | Good to know |
|---|---|---|
| Solo 401(k) | Up to $24,500 as the “employee,” plus employer contributions, up to $72,000 total | Age 50+ can add an $8,000 catch-up ($11,250 at ages 60–63). Offers a Roth option. |
| SEP IRA | About 20% of net self-employment earnings, up to $72,000 | Simple to open and run, but no employee deferral and no catch-up. |
| Traditional or Roth IRA | $7,500 ($8,600 at age 50+) | Can be used alongside either plan, subject to income rules. |
For many solo providers, a Solo 401(k) lets you save more at lower incomes than a SEP IRA, because of that $24,500 employee contribution. Compare both with your CPA.
7. Read your contracts carefully
- Rate and payment terms: hourly or daily rate, overtime and call pay, and when you get paid (for example, within 30 days of invoice).
- Cancellation terms: what happens if the facility cancels your shift or ends the contract early.
- Malpractice and tail: covered above, and worth asking about twice.
- Credentialing time: hospital credentialing often takes weeks to months, so plan your start date and cash flow around it.
- Non-compete clauses: know what you’re agreeing to before you sign. A healthcare attorney can review it.
8. Should you become an S corporation?
Once your income is high enough, some independent providers elect S corporation tax treatment for their LLC. You pay yourself a reasonable salary through payroll, and profits above that salary aren’t subject to self-employment tax. It can save real money, but it adds payroll, extra tax filings and costs, and the salary has to be defensible. This is a decision to make with a CPA, not on your own.
The tools that make it easier
- Bookkeeping software such as QuickBooks, FreshBooks or Wave, to track income, expenses and mileage.
- A separate tax savings account, ideally a high-yield savings account, so tax money earns interest until it’s due.
- A CPA who works with physicians, CRNAs or other independent clinicians. Worth every dollar in your first year.
A full guide to the best accounting and tax tools for independent providers is coming soon.
FAQ
How much should I set aside for taxes?
It depends on your income, state and deductions. Many contractors set aside a fixed percentage of every payment, then adjust after meeting with a CPA. The key is to set it aside the day you’re paid.
Do I need an LLC to work 1099?
No. You can work as a sole proprietor under your own name. An LLC can add some separation between business and personal finances, and it’s required if you later want S corporation tax treatment.
Can I have both W-2 and 1099 income?
Yes, and many CRNAs do. Your W-2 withholding can even help cover some of the tax on your 1099 income, but you may still need estimated payments. Retirement limits are shared across plans in some cases, so check with your CPA.
What happens if I miss an estimated payment?
The IRS can charge an underpayment penalty, which works like interest on the amount you should have paid. Pay as soon as you can to limit it.
Everything here reflects my personal views and opinions, based on my own research. It is not financial, tax or legal advice. Talk to a CPA or attorney about your own situation.