From Focus Partners, Brian Roemke discusses the options for hiring an associate dentist including the benefits and risks of engaging wth an independent contractor and classification challenges. Brian writes:
Pros and cons of the 1099 independent contractor option.
There may be instances where an incoming associate dentist should be hired as a 1099 independent contractor and not as a W-2 employee. To begin, the practice will not be required to pay the employer’s share of payroll taxes, workers’ compensation, or offer any benefits. This will likely reduce the practice’s overall administrative work for this individual . Also, an independent contractor job status can give the owner more flexibility to hire or fire.
As an independent contractor, the associate would be responsible for their own taxes. However, they would have the flexibility to float to multiple offices to ensure they can work the desired number of days per week, deduct work expenses on their tax return, set up their own benefits, and implement a retirement plan, such as a SEP IRA or Solo 401(k).
Now let’s discuss the potential negatives. First, the practice may have less control over the associate. As a contractor, they will be able to oversee their schedule, clinical methods, and may even work in multiple offices, some of which might be in direct competition with your practice. Next, and perhaps most importantly, if the IRS determines the associate should be classified as an employee, you could face penalties, back taxes, and legal issues. This determination is part of what is known as the control test. In the simplest of definitions, this means as their employer, will you control when, where, and how the associate performs their work? If you answer yes to this question, then the associate should likely be classified as a W-2 employee.
Read the full story at Employee vs. Contractor: Choosing the Right… | Focus Partners Wealth
