Illustrative 1099 CRNA case study
Plenty was going right.
The missing piece was not effort. It was coordination.
Corrected executive summary
The modeled opportunity cost of leaving the system unchanged.
The original illustration mixed permanent savings, tax deferral, contribution capacity, and hypothetical growth. The corrected view keeps them separate.
Modeled first-year opportunity
Screened base case under the stated assumptions.
Conditional recurring portion
Entity, payroll, HSA, and net investment-cost effects.
Current-year tax deferral
Cash balance estimate. Deferred is not permanently saved.
The $66,974 is the screened first-year opportunity cost of inaction, not a guarantee. It includes $17,641 of conditional recurring improvement and $49,333 of current-year tax deferral. It does not include the household’s potential Roth and HSA contributions.
A longer lens
If the recurring portion repeated unchanged
Straight-line cumulative impact in fixed dollars. No investment growth is assumed.
- 10 years
- $176,412
- 20 years
- $352,825
- 30 years
- $529,237
This sensitivity assumes the same $17,641 recurring amount every year. It does not model inflation, tax-law changes, income changes, fee changes, plan expenses, implementation failures, or investment returns. It is not a forecast.
Potential 2026 Roth and HSA contribution capacity
This is the household’s money entering tax-advantaged accounts, not savings, return, or advice-created wealth. Do not add it to the opportunity figures above.
Current structure
Good pieces. No shared operating system.
- Investment management covered only part of the assets.
- Payroll and retirement-plan design were disconnected.
- Roth, HSA, and IRA decisions happened separately.
- No single calendar connected the professionals.
Coordinated review
One set of facts. One sequence.
- Household-wide costs were measured together.
- Wages, benefits, and plan design shared one model.
- Contribution capacity stayed separate from savings.
- The CPA, actuary, payroll team, and advisor had one order.
Ann and Alan were doing plenty right. The case included $340,000 of gross CRNA practice revenue, $215,000 of W-2 wages, and more than $1 million saved. Nobody was lighting money on fire.
The problem was not effort. Their business, payroll, retirement plans, taxes, health coverage, and investments were all being handled in separate rooms.
Ann’s 1099 CRNA practice affected the retirement plan. The retirement plan affected the tax brackets. Two rollover IRAs affected Roth conversions. Health coverage affected HSA eligibility. Investment costs looked different once we compared every account, not just the assets one advisor happened to manage.
This is what changed when we stopped reviewing the pieces and started coordinating the system.
For a CRNA balancing clinical work with a 1099 business, the value is not another spreadsheet. It is having someone notice when one payroll decision changes three other parts of the plan, then making sure the right professionals act before the deadline. Ann did not need to become her own payroll department between shifts.
01
The household snapshot
Strong numbers did not automatically create a strong system.
Gross inflows
$340,000 of gross CRNA practice revenue plus $215,000 of W-2 wages.
Household assets
Held across taxable investments, two rollover IRAs, an employer 401(k), and cash.
Existing accounts
Each account looked reasonable by itself. The gaps appeared between them.
Planning questions
Not nine automatic recommendations. These were nine ideas requiring one order of operations.
Disconnected
Separate professionals. Separate decisions.
- The CPA explained last year’s return.
- The advisor managed only part of the assets.
- Payroll was not connected to retirement-plan design.
- Roth, HSA, and investment decisions happened independently.
Coordinated
One plan. One sequence. Shared assumptions.
- Compensation drove payroll and retirement-plan testing.
- The actuary, CPA, payroll provider, and advisor used the same cash-flow model.
- Each spouse’s IRA position was reviewed separately.
- Costs and tax treatment were measured across the household.
02
Where the opportunities lived
The value was in the connections.
Business structure and payroll
An S-corporation was worth testing, not assuming.
Ann’s practice created a potential payroll-tax opportunity, but an S-corporation does not make reasonable compensation optional. The IRS can reclassify distributions as wages when the shareholder’s services produce the business revenue.
We modeled cash wages, health-insurance treatment, employer payroll tax, and annual administration together. We did not count putting Alan on payroll as an automatic win; wages create payroll costs, and any retirement contribution must be weighed against them.
Source: IRS guidance on S-corporation reasonable compensation
Solo 401(k), cash balance, and Roth
Contribution capacity and tax savings are not the same thing.
A Solo 401(k) and cash balance plan could create meaningful retirement capacity. But the labels matter: a designated Roth 401(k) contribution remains in current taxable income, while a qualifying cash balance contribution generally creates a current deduction and future taxable distributions.
For 2026, the basic 401(k) employee-deferral limit is $24,500 and the IRA limit is $7,500. A cash balance contribution must be determined by an actuary and tested against the practice’s actual profit and cash flow.
Potential mega backdoor Roth capacity was useful only if the Solo 401(k) expressly permitted after-tax contributions and in-plan Roth conversions, and only if cash remained after required employer and cash balance funding.
Sources: IRS 2026 retirement limits, IRS defined-benefit plan guidance
The rollover IRA issue
The backdoor Roth was complicated, not “blocked.”
Ann and Alan each had a rollover IRA. The Form 8606 pro-rata calculation is performed separately for each spouse and uses that person’s year-end traditional, SEP, and SIMPLE IRA balances.
Existing pre-tax IRA money does not prohibit a conversion. It can make most of the conversion taxable. If an eligible employer plan accepts incoming rollovers, moving pre-tax IRA assets may create a cleaner path. Fees, investments, creditor protection, and plan rules still need review.
Source: IRS Form 8606 instructions
Health insurance and HSA treatment
The HSA worked only if eligibility and payroll reporting worked.
The 2026 family HSA limit is $8,750. Ann needed qualifying high-deductible coverage, no disqualifying coverage, and correct greater-than-2% shareholder reporting. Eligibility is month by month; the contribution limit alone does not prove the household can fund it.
Investment costs and tax management
Measure the portfolio that exists, not a simple average.
The planning illustration assumed a 0.78% gap between current fund expenses and a lower-cost portfolio. Applied to $750,000, that would equal $5,850 per year. Before treating it as savings, we would verify the current expense ratio using the actual dollar weight of every holding.
Asset location and tax-loss harvesting can also help. Their value varies by account, tax lot, market movement, realized gains, and future tax rates. We excluded the direct-indexing backtest and projected portfolio charts from the opportunity total because results vary, and hypothetical performance in adviser advertising has additional requirements.
Sources: Investor.gov on fees, SEC Investment Adviser Marketing guide
03
What the rebuilt math showed
The number mattered. Its label mattered more.
Roughly $49,000 of the total was current-year tax deferral from the cash balance plan, not permanent tax savings. The S-corporation result depended on reasonable compensation. The HSA result depended on eligibility. The investment-cost result depended on confirming the actual holdings.
For the long-term sensitivity, we extended only the $17,641 conditional recurring portion. If the year-one assumptions repeated unchanged, that would equal $176,412 over 10 years, $352,825 over 20 years, and $529,237 over 30 years. Those are simple cumulative amounts with no investment growth. We did not multiply or compound the cash balance tax deferral.
To make the calculation reproducible, the model provisionally treats Ann’s $340,000 practice figure as net self-employment profit. If it is gross revenue, no responsible tax projection can be made until ordinary business expenses are known.
We kept $88,550 of potential Roth and HSA contribution capacity outside the total because contribution room is not savings. That figure consists of a $24,500 designated Roth deferral, $40,300 of potential after-tax Solo 401(k) capacity, $15,000 across two IRAs, and an $8,750 family HSA contribution. The Solo 401(k) capacity depends on plan terms and the overall annual-additions limit. The $8,750 contribution is capacity; only its modeled current-year income-tax effect appears above.
We also excluded speculative QBI, spouse-payroll, bond-tax-drag, home-rental, home-office, tax-loss-harvesting, and long-range compounding values that the available facts could not support cleanly.
Related-party home rental, often called the Augusta Rule, and a home-office accountable plan remained specialist-review items until business purpose, fair-market value, exclusive use, documentation, and reporting requirements were verified.
The screened base case assumed $105,000 of FICA wages, a $15,000 health-insurance benefit, $2,400 of S-corporation administration, a $155,000 actuarially determined cash balance contribution, an $8,750 HSA contribution, married filing jointly, and the proposal’s simplified tax baseline. The investment figure is a modeled $5,850 fund-cost reduction less a $4,065 advisory-fee increase. Cash balance plan setup, actuarial, and ongoing plan-administration costs were not provided and are not included.
The point was not to make the biggest number fit on a page. It was to show which value was recurring, which was conditional, and which was simply tax deferred until later.
Calculation inputs: 2026 IRS brackets and standard deduction, 2026 Social Security wage base, Michigan’s 2026 individual income-tax rate.
Want to see the original tables and implementation roadmap behind this case study?
Full strategy comparison
Enlarge the proposal. Follow the full planning logic.
The article explains the corrected conclusions. The full 21-page illustrative proposal shows how the household snapshot, nine strategy ideas, account recommendations, cost comparison, and implementation roadmap fit together.
04
The implementation order
The advice was the sequence.
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01
Verify net practice profit, ordinary expenses, health coverage, account rules, and asset-weighted investment costs.
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02
Complete the entity and reasonable-compensation analysis before running payroll-tax projections.
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03
Ask an actuary to test the cash balance plan, required funding, annual costs, and Solo 401(k) interaction.
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04
Review each spouse’s rollover options and clear pro-rata complications only when the receiving plan is appropriate.
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05
Protect operating cash and tax reserves, then fund accounts in the agreed priority instead of chasing every limit.
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06
Give the CPA, actuary, payroll provider, custodian, and advisor one shared implementation calendar.
05
When these strategies would not fit
Good planning includes knowing when to say no.
Cash flow is too tight.
A large retirement contribution is not helpful if it compromises taxes, payroll, or the household reserve.
The wage is not defensible.
If reasonable compensation absorbs most practice profit, an S-corporation may add complexity without enough benefit.
The health coverage is not eligible.
Non-HDHP coverage, Medicare, or another disqualifying plan can reduce or eliminate HSA contribution eligibility.
The employer plan is a poor destination.
A rollover may solve the pro-rata issue while creating worse investments, fees, service, or access.
Liquidity matters more.
Tax-advantaged accounts can restrict access. Near-term goals may deserve priority over maximizing every limit.
The complexity costs more than it creates.
Payroll, actuarial, plan, advisory, tax-preparation, and investment costs all belong in the comparison.
The real takeaway
A high income gives you options. It does not organize them for you.
Ann and Alan did not need more disconnected recommendations. They needed one financial operating system.
The value of the advice was seeing how the business, payroll, tax return, retirement plans, health coverage, IRAs, and investments affected one another, then deciding what to do first.
That is the difference between collecting financial ideas and receiving coordinated advice. One gives you more things to think about. The other helps you act in the right order.
It’s my pleasure to help keep your financial life on point.
Ben
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