Can a Physician Assistant be Self Employed? | PA Employee
Self-Employed / Independent Contractor Receives a 1099
Can a physician assistant be self-employed? There are two types of employment relationships for a PA. You can either be an employee or an independent contractor. If you are an independent contractor, you would be considered self-employed, and let’s kind of break down the distinction between the two. If you’re working as an independent contractor, in most situations, that’s going to be when you’re working likely part-time, maybe if you’re in a surgical specialty, you’re assisting in surgery maybe a couple of times a month and the physician doesn’t want to employ you, well, then they would pay you as an independent contractor. And in that scenario, you would receive a 1099 at the end of the year, and no taxes will be withheld from any compensation that you would receive.
An Employee Receives a W2
As an employee, you’ll receive a W2 at the end of the year, and all taxes will be withheld throughout the year. Now, the main difference between the two beyond the tax part of it, is you’ll get benefits as an employee. So, health, vision, dental, retirement, disability, and life insurance, they’ll pay for your continuing education, your license, and DEA registration, and you’ll get paid time off. Whereas as a 1099 independent contractor, when you’re self-employed, you won’t receive any of those. However, most smart PAs will create an LLC, get a tax ID number, and an EIN, and then create a bank account for that business and then run all the compensation and expenses through that bank account. That way, they can track their expenses, and then they can deduct all of those expenses that I just mentioned before as business expenses.
So, travel, licensure, malpractice insurance, health insurance, cell phone, or any of the things that are necessary to practice as a physician assistant can be used as tax deductions if you’ve created an LLC. If you’re wondering, can you be self-employed? Certainly can, but it must be the right scenario. Now, there may be employers, and this certainly is true with physicians who want to make you work full time essentially as an employee but pay you as an independent contractor. And really the only reason why they want to do that is to get out of having to pay employment taxes, which are somewhere between 10 to 12% of your total compensation. And then if they also classify you as an independent contractor, as I said before, they’re probably not going to give you any of those benefits. Other topics of interest include:
- Is a W2 or 1099 Better for a Physician Assistant?
- Physician Assistant Independent Contractor vs Employee
If you have an employer doing this saying, alright, well, you’re going to work full-time for us Monday through Friday, nine to five, whatever, but we’re going to classify you as an independent contractor, they’re saving probably 20ish percent of your total comp when you add in all the benefits and employment tax. Well, they can be dinged if the IRS were to come back, look at the employment relationship, and then determine that you weren’t acting as an independent contractor. The IRS has a 20-factor test that kind of breaks down whether someone is an independent contractor or an employee. I would suggest looking at that and just Google it. You can find the test to determine where you fall on that. And then if you do have concerns, I would approach them with the employer prior to signing any kind of independent contractor agreement or employment agreement and just break down with them. Look, I believe you’re misclassifying me.
Here are the potential problems with that. It can be advantageous on a tax basis to be a 1099. Now, some PAs just simply don’t want the hassle of having to get and set up all of those things. They don’t want to have to go out and get their own health insurance, and vision and dental, and set up retirement and get a life insurance and disability policy, pay for their own stuff, their CE, get no paid time off, like a lot of PAs just aren’t interested in that. In that way, in that scenario, obviously being an independent contractor is not the right way to go. However, the more entrepreneurial in nature as an independent contractor, theoretically, it should be kind of at your option of when you want to work. And so, they can work for multiple different physicians and maximize their income in that way.
1099 Self Employed PA
What is a 1099 physician assistant? If you are an employee for private practice or hospital, you’ll receive a W2 at the end of the year, and then you’ll have taxes withheld from the compensation that you receive from that employer. Whereas if you are working as an independent contractor, you’ll receive a 1099 at the end of the year, and no taxes will be withheld at all from your compensation. You will be responsible for paying for those taxes either on a quarterly or annual basis, depending upon how you want to do it. If you’re thinking of becoming an independent contractor, maybe you’re going to work part-time, maybe you’re in orthopedics or surgery or something like that, and physicians ask you to assist maybe one or two times a month, they’re not going to classify you as an employee. More than likely you’ll be an independent contractor.
Just because they’re not going to provide all the benefits. I mean, the biggest difference between working as a W2 versus 1099 is the benefits offered when you’re an employee. As an employee, you’re going to get health, vision, dental, disability, life, retirement, and paid time off. They’re going to pay for your continuing education, your license, and DEA registration. All the things that are needed to practice safely and effectively as an employee, they’re going to pay for all of that. When you work as an independent contractor in a 1099, you’re going to be responsible for all those things. Now, this doesn’t mean that you can’t deduct most of those expenses, but you need to set it up properly.
Most PAs, if they’re going to work as an independent contractor, they are going to create an LLC, and then they’re going to get a tax ID number and a bank account in the state that they’re working. And then they’re going to put all the compensation expenses through that account so that they can be tracked appropriately. And then at the end of the year, you can use all of those expenses as tax deductions for your LLC. I would suggest meeting with an accountant prior to taking on any kind of independent contractor position to set things up appropriately. And once you set it up, you’re good to go in the future as well. It’s not like you need to do it every single time. I would suggest that you absolutely do that prior to taking any kind of independent contractor job. The things you can ultimately deduct are essentially all the things that I went over with the licensure, DEA, travel, car expenses, and malpractice insurance. All of that stuff you can deduct from your compensation.
Now, one thing to think about: if you’re working for, let’s just say a physician-owned practice. Employment taxes usually cost somewhere between 10 to 12%. Additionally, if they’re paying you as an independent contractor, they’re saving on offering you any of those benefits too. If they’re offering you the exact same compensation as an independent contractor versus maybe some of their employees, that’s not fair, they’re going to be saving somewhere between 10 to 20% on the total cost by classifying you as an independent contractor. So, there is some room for negotiation, as far as if you’re working, let’s say on an hourly rate, which most people would as an independent contractor, you should ask for a little bit more to kind of offset the savings that the employer is going to receive by classifying you as an independent contractor. I’d say anywhere between a 5% to 15% increase on the hourly rate would be considered, or at least I would consider a reasonable amount.
They’re still going to come out ahead in the end as far as compensation and tax-wise. So, passing a little bit of that onto the PA just makes sense. That’s what a 1099 independent contractor physician assistant is.
Physician Assistant Employee Non Compete
Is a non-compete enforceable against a physician assistant? In short, it likely is. There are a handful of states in the United States where non-compete for healthcare providers are completely unenforceable. But as I said before, it’s less than five. So, it’s very likely if you’re reading this blog, that you’re in a state where they are considered reasonable and enforceable. What are some things that go into making a non-compete enforceable? Well, a non-compete simply says that the physician assistant can’t work within their specialty for a set period within a specific geographic region. How most practices would do this is let’s just say a PA is an employee of a small physician-owned group.
Now, let’s say you’re an orthopedic PA, the non-compete could state, you can’t work in orthopedics for one year within 10 miles of our office location, and then maybe the primary location where you are assisting in surgeries as well. That would most likely be considered a reasonable non-compete in most states. Most non-competes are going to be somewhere between one to two years. Anything more than two years is likely going to be considered unenforceable. So, I would attempt to try to keep it to a one-year maximum. As far as the mileage, it really depends on where you are. Obviously, if you’re in a city with a high density, one mile in rural Idaho is very different from one mile in the middle of Manhattan. Depending upon where you are geographically, it’s going to kind of determine whether the mileage is considered reasonable or not.
I mean, I will see some non-compete that will knock people out of counties, entire states, a hundred miles from their primary practice location. For the most part, these would not be considered reasonable and enforceable. If you’re working for a corporate-owned practice, or maybe they have multiple locations, you want to limit that geographic restriction to where you’re working. I’ll see contracts where maybe they’ll have 10 locations throughout a city. They’ll say it’s 10 miles from all 10 locations in the city. That’s not fair. It’s not fair that you’re restricted from working somewhere that you have never been close to. So, you want to limit the number of places that the non-compete can apply to. And as I said before, no more than two. Maybe the two places where you generate most of your charges.
Carefully Check the Non-Compete
As I said before, as far as counties go, sometimes employers will state, you can’t work in the county that you’re in or any contiguous county, so any counties touching your county. I don’t think that would be considered reasonable or enforceable as well. Never go into a contract just expecting that it won’t be enforced. That’s a dumb way of looking at it. Okay, maybe it won’t be, but it may require litigation or arbitration on your behalf to get to that point, which can be expensive, time-consuming, and usually a waste of time. So, don’t sign a non-compete and think, it’s alright, they won’t be able to enforce it. Unless you’re in one of the states where it is completely unenforceable. And if someone is providing you with a non-compete in a state where they are completely unenforceable, it usually means they have no idea what they’re doing and it’s an enormous red flag and you should probably run and find someone else who understands the laws of the state that they’re in. A non-compete is a huge part of any contract.
Consultation with Chelle Law
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