Can a Physician Assistant be Self Employed?
Can a physician assistant can 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.
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, 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.
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