Travel Nurse W-2 vs. 1099: Key Differences and What They Mean for You

Introduction: W-2 vs. 1099 — It Is More Than Just a Tax Form

When you sign a travel nursing contract, the classification on that contract — W-2 employee or 1099 independent contractor — affects far more than which tax form you receive in January. It determines how your taxes are handled, what benefits you receive, who carries liability insurance, what deductions you can take, and how much control you have over your schedule.

The vast majority of travel nurses work as W-2 employees through staffing agencies, and for most nurses, that is the right arrangement. But 1099 independent contracting is growing in popularity, and understanding the trade-offs is essential before you consider making the switch — or before you sign a contract without realizing which classification you are agreeing to.

Disclaimer: This guide is for educational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.

W-2 Travel Nurse: How It Works

As a W-2 travel nurse, you are an employee of the staffing agency. The agency is your employer in every legal and tax sense of the word.

Tax withholding: The agency withholds federal income tax, state income tax, Social Security tax (6.2%), and Medicare tax (1.45%) from every paycheck. You do not need to calculate or send tax payments yourself throughout the year — the agency handles it.

Your tax form: At the end of the year, you receive a W-2 form showing your total taxable wages and the total taxes withheld. You use this to file your annual tax return. Non-taxable stipends should not appear on your W-2.

Benefits: Most agencies offer W-2 employees benefits including health insurance, dental and vision coverage, 401(k) retirement plans, workers’ compensation insurance, and professional liability coverage. The specifics vary by agency, but having access to employer-sponsored benefits is a significant advantage of W-2 status.

Employer-paid taxes: The agency pays the employer portion of FICA taxes — an additional 6.2% for Social Security and 1.45% for Medicare — on top of what they withhold from your paycheck. You never see this cost, but the agency absorbs it as part of their overhead.

This is the standard. The large majority of travel nurses work under W-2 arrangements, and most staffing agencies operate exclusively with W-2 employees.

1099 Travel Nurse: How It Works

As a 1099 travel nurse, you are an independent contractor. You are not an employee of any agency — you are effectively running your own business.

No tax withholding. When you receive payment, you get the full amount. Nothing is withheld for federal taxes, state taxes, Social Security, or Medicare. This can make your paychecks look significantly larger — but that is misleading, because you owe all of those taxes yourself.

Your tax form: At the end of the year, you receive a 1099-NEC (Nonemployee Compensation) form showing the total amount you were paid. It does not show any withholdings because there were none.

Self-employment tax: This is the biggest financial difference. As a 1099 contractor, you pay the full FICA tax yourself — both the employee and employer portions. That means 12.4% for Social Security plus 2.9% for Medicare, totaling 15.3% on your net self-employment income. You can deduct half of this on your tax return, but the upfront cost is substantial.

Quarterly estimated taxes: Because no taxes are withheld, you must calculate and pay estimated taxes to the IRS quarterly (and to your state, if applicable). Missing these payments results in penalties and interest.

Benefits — you provide your own. No employer-sponsored health insurance, no 401(k) match, no workers’ compensation, and no professional liability coverage. You buy your own health insurance, set up your own retirement accounts (SEP IRA, Solo 401(k)), and carry your own malpractice insurance policy.

More deductions available. As a self-employed individual, you can deduct business expenses on Schedule C — mileage, continuing education, licensing fees, scrubs, equipment, home office costs, and more. These deductions reduce your taxable income and can partially offset the self-employment tax burden.

Key Differences at a Glance

Factor	W-2 Employee	1099 Independent Contractor
Tax withholding	Automatic from every paycheck	None — you manage it yourself
Self-employment tax	N/A (employer pays their share)	15.3% on net income
Tax filing complexity	Moderate	High — Schedule C, quarterly estimates
Benefits	Agency-provided options	Self-sourced and self-paid
Workers’ comp	Agency-covered	Not covered — carry your own
Malpractice insurance	Usually agency-provided	Must purchase your own policy
Deductions	Limited (standard or itemized)	Extensive Schedule C deductions
Schedule control	Agency/facility-directed	More autonomy (in theory)
Retirement plans	401(k) through agency	SEP IRA, Solo 401(k), etc.
Overtime eligibility	Yes (FLSA protections)	Not guaranteed

Tax Implications

W-2 Tax Picture

The W-2 tax picture is relatively straightforward:

Taxes are withheld from every paycheck, so you have a running estimate of your liability throughout the year.
You claim the standard deduction (or itemize if your deductions exceed the standard amount, which is uncommon for W-2 employees after the 2017 tax law changes).
Your stipends are handled by the agency — housing and M&IE stipends appear as non-taxable on your pay stub (assuming you have a valid tax home) and do not show up on your W-2.
You file once per year with your W-2(s) and any other income documents.
Multi-state filing is the main complexity for W-2 travel nurses. For help with this, see our guide on finding a travel nurse CPA.

1099 Tax Picture

The 1099 tax picture is significantly more complex:

No withholding means you must set aside money from every payment for taxes. A common rule of thumb is to save 25% to 30% of your gross income for taxes, though the exact percentage depends on your total income and deductions.
Self-employment tax (15.3%) is in addition to your regular income tax. You can deduct the employer-equivalent half (7.65%) when calculating your adjusted gross income, but you still pay the full 15.3% in self-employment tax.
Schedule C deductions are your primary tool for reducing taxable income. Every legitimate business expense — licensing fees, continuing education, malpractice insurance premiums, travel costs, scrubs, stethoscopes, phone bills (business portion), and more — reduces your taxable income.
Quarterly estimated tax payments are due four times per year (April 15, June 15, September 15, and January 15 of the following year). Underpayment triggers penalties.
Filing is more complex. You will need Schedule C (profit or loss from business), Schedule SE (self-employment tax), and possibly additional forms. Most 1099 travel nurses need a CPA.

Which Pays More? The Real Math

The most common misconception about 1099 work is that it pays more because “you get the whole check.” On paper, your gross payments may be higher as a 1099 contractor. But once you account for all the costs that a W-2 arrangement covers, the math often tells a different story.

Example comparison for a 36-hour-per-week contract:

W-2 Package:

Base rate: $25/hr ($900/week taxable)
Housing stipend: $1,000/week (non-taxable)
M&IE: $350/week (non-taxable)
Weekly gross: $2,250
Agency provides health insurance, workers’ comp, malpractice, and 401(k)
Taxes withheld automatically

1099 Package:

Flat rate: $62/hr ($2,232/week — all taxable unless structured otherwise)
No benefits provided
Weekly gross: $2,232

The 1099 gross looks comparable, but now subtract the costs the W-2 nurse does not pay:

Self-employment tax (15.3%): approximately $342/week
Health insurance (self-purchased): approximately $100 to $200/week
Malpractice insurance: approximately $25/week
Retirement (no employer match): variable
Accounting/CPA fees (prorated): approximately $15/week

After these costs, the 1099 nurse’s net compensation drops below the W-2 nurse’s in many scenarios — and the W-2 nurse had far less administrative burden.

When 1099 genuinely pays more: The 1099 model can win when the gross rate is substantially higher than the W-2 equivalent (not just slightly higher), when you maximize Schedule C deductions, and when you have a business structure (LLC or S-Corp) that provides additional tax advantages. But the margin needs to be wide enough to cover all the additional costs and complexity.

Use the pay calculator to model both scenarios with your actual numbers before making a decision.

Risks and Red Flags

Worker Misclassification

One of the biggest risks in the 1099 travel nurse space is misclassification — when an agency classifies a nurse as an independent contractor but treats them like an employee.

The IRS uses several criteria to determine whether a worker is genuinely an independent contractor or an employee. The key factors include:

Behavioral control: Does the agency or facility dictate when, where, and how you work? If they set your schedule, assign your unit, and control your daily activities, that looks like an employment relationship — not an independent contractor arrangement.
Financial control: Do you have the ability to work for multiple clients, set your own rates, and control your business expenses? Or does one entity control your compensation and work conditions?
Relationship type: Is there a written contract specifying independent contractor status? Are benefits provided? Is the relationship expected to continue indefinitely?

The red flag: If an agency “requires” you to be a 1099 contractor but controls your schedule, assigns you to specific facilities, and directs your work just like a W-2 employer would, you may be misclassified. This matters because:

For the agency: Misclassification allows them to avoid paying the employer portion of FICA taxes, providing workers’ comp, and offering benefits. This saves them significant money — at your expense.
For you: If the IRS determines you were misclassified, you may owe back taxes that should have been withheld. You also lose the legal protections afforded to employees, including overtime pay, workers’ comp coverage, and unemployment insurance.

How to report suspected misclassification: You can file IRS Form SS-8 (Determination of Worker Status) to have the IRS evaluate your classification. You can also file a complaint with your state’s labor department.

Who Should Consider 1099?

The 1099 model is not for everyone, but it makes sense for certain travel nurses:

Nurses who want maximum schedule flexibility. True independent contractors have more control over when, where, and how often they work.
Those with an LLC or S-Corp structure. Business entities can provide additional tax advantages, including potentially reducing self-employment tax through reasonable salary/distribution splits (for S-Corps).
Nurses comfortable managing their own taxes and benefits. If you enjoy the business side of things and are organized enough to handle quarterly payments, insurance shopping, and deduction tracking, 1099 can work well.
Those who can take advantage of extensive deductions. If you have significant business expenses that reduce your taxable income, the Schedule C deductions available to 1099 contractors can offset some of the self-employment tax burden.
Nurses with a CPA already on their team. Having professional tax guidance is not optional for 1099 work — it is essential. If you already work with a travel-nurse-savvy CPA, they can help you structure the arrangement to your advantage.

FAQ

Can I switch from W-2 to 1099 mid-contract?

No. Your classification is determined at the start of the contract and does not change mid-assignment. The classification is based on the legal relationship between you and the agency (or client), not on your personal preference. If you want to switch to 1099 for your next contract, you will need to find an agency or direct placement that offers independent contractor arrangements. Be aware that switching from W-2 to 1099 means taking on significant additional responsibilities for taxes, insurance, and benefits.

Do 1099 nurses still get stipends?

This is a gray area. The tax-free stipend structure (housing, M&IE) is based on employer-employee reimbursement rules under IRS accountable plan guidelines. As an independent contractor, the traditional stipend model does not apply in the same way. Some 1099 arrangements include separate payments for housing and meals, but the tax treatment may differ. A CPA experienced with 1099 travel nursing can help you understand how to structure your compensation to maximize tax benefits legally. Do not assume that stipends work the same way in a 1099 arrangement as they do in a W-2 arrangement.

Is 1099 higher risk for an IRS audit?

Self-employed individuals do face somewhat higher audit scrutiny than W-2 employees. Schedule C filers are flagged more frequently because the IRS knows that business expenses can be inflated. The key to reducing your audit risk is meticulous record-keeping: keep receipts for every deduction, maintain clear records of business vs. personal expenses, and do not claim deductions you cannot substantiate. Working with a CPA who reviews your return before filing significantly reduces both the likelihood of an audit and the risk of a negative outcome if you are audited.

Should I form an LLC as a 1099 travel nurse?

An LLC (Limited Liability Company) can provide liability protection and, if you elect S-Corp tax treatment, potential tax savings on self-employment tax. However, forming and maintaining an LLC involves costs (state filing fees, registered agent fees, potential franchise taxes) and additional compliance requirements. Whether it makes sense depends on your income level, your state’s LLC laws, and your long-term plans. This is a decision to make with your CPA, not on your own. They can model the tax impact and help you determine whether the savings justify the costs and complexity.

Can I be 1099 with one agency and W-2 with another simultaneously?

Yes, this is possible and not uncommon. You can have a W-2 arrangement with one agency and a 1099 arrangement with another at the same time (though not working two full-time contracts simultaneously, of course). You would receive a W-2 from the first and a 1099-NEC from the second. At tax time, you report both — the W-2 income on your regular return and the 1099 income on Schedule C. The complexity increases, which is another reason a CPA is valuable. Make sure you understand the tax and insurance implications of each arrangement before committing.

Key Takeaways

Most travel nurses are W-2 employees, and for the majority, that is the better arrangement. W-2 provides automatic tax withholding, employer-paid benefits, workers’ comp, malpractice coverage, and simpler tax filing.
1099 offers more deductions and potentially more flexibility but comes with self-employment tax (15.3%), the responsibility of managing your own taxes and benefits, and significantly more complexity.
Always run the full math before choosing 1099. A higher gross rate does not always mean higher take-home pay once you factor in self-employment tax, insurance costs, and administrative burden.
Watch for misclassification. If an agency controls your schedule and work like an employer but classifies you as 1099, you may be misclassified — and that puts you at financial risk.
Consult a CPA experienced with travel nursing before making the W-2 vs. 1099 decision. The right choice depends on your specific financial situation, tax home status, and career goals.

Affiliate Placement Notes

CPA referral link in “Who Should Consider 1099” and key takeaways
Tax software affiliate in the tax implications section
Malpractice insurance affiliate in the risks section (1099 nurses need their own policy)
LLC formation service affiliate in FAQ about forming an LLC