Physician Assistant Independent Contractor vs Employee
What is the difference between being an independent contractor and an employee as a physician assistant? As a PA, those who are maybe in the more surgical specialties assisting with surgeons, you certainly can have opportunities where it’s a kind of a part-time basis and it’s up to you when you want to assist. And in that scenario, it probably would make sense to be an independent contractor. As an independent contractor, you’ll receive a 1099 at the end of the year, and no taxes will be withheld from your compensation throughout the year. Now, the downside of being an independent contractor is you’re not going to get any of the benefits that you would receive as an employee who received a W2.
Normally, as an employee, you’re going to get health, vision, dental, disability, life, and retirement, they’ll pay for your continuing education, your license, and DEA registration, you get paid time off, and they’ll pay for your malpractice insurance. The employer in a normal relationship is going to pay for all those things. Whereas as an independent contractor, you will be responsible to pay for all of that and secure it as well. Now, if you are a smart PA, you will create an LLC. If you’re interested in being an independent contractor, you’ll get a tax ID number from the federal government, an EIN, and then you’ll also create a bank account for that company. And then you’ll run all compensation and expenses through that account. That way, you can create tax deductions for all of those expenses that I just said, you can deduct the insurance and the license and the DEA and all of the travel, cell phone, all of the things that are necessary to work as a PA, you can deduct if you have the LLC and you’re working as an independent contractor. Now, there will be scenarios, most likely where you’ll approach an employer for a job.
And it’s a full-time job, it’s a normal nine to five, and they may say, look, we want to classify you as an independent contractor and pay you as such. Well, the IRS offers a 20-factor test that kind of determines or gives guidelines on, alright, is somebody an independent contractor or an employee? I find that most of the time if an employer is hiring a PA full-time and wants them to be an independent contractor, they’re just doing that to get out of paying employment taxes. If you’re concerned that you’re being misclassified, I would look at that factor test and then approach the employer with your concerns that say, look, you’re treating me as an independent contractor, but you’re requiring me to do all of the things that a normal employee would do. Other topics of interest include:
- Physician Assistant Independent Contractor Tax Deductions
- Can a Physician Assistant be Self Employed?
Plus, you’re not giving me any benefits. If you think about it, employment taxes can cost somewhere between 10 to 12%, and benefits can be somewhere between 8 to 12%, so they could be saving 20% on classifying you as an independent contractor. Now, the IRS can come in after the fact and say, well, you’ve been misclassifying this person. And then there can be some back taxes that are owed but it’s better to speak up in advance of signing anything if you’re concerned that you may be misclassified. Some people, even if there are tax advantages to being an independent contractor and even if they have a bunch of different part-time jobs, don’t want the hassle of going out and finding all of the malpractice and health vision, dental, disability, life, setting up retirement.
Some people simply have no interest in doing that. And so, if that’s the case, you need to look for jobs or you’ll be an employee and not an independent contractor. An independent contractor agreement should be kind of easy in, easy out, meaning the notice required to terminate the agreement should be shorter. You should avoid any kind of restrictive covenants. No non-compete, non-solicit, those types of things. They should theoretically be absent from an independent contractor agreement. Whereas you’re going to see all of those things in an employment contract, usually, somewhere between 60 to 90 days without cause notice. There’s always going to be a non-compete unless you’re in a state where it’s completely invalid. There are pros and cons of being an employee and an independent contractor. And it just kind of depends upon the situation that you’re in, whether it makes the most sense.
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