Should a Veterinarian be a W2 or a 1099? | Veterinary Independent Contractor

Is a W2 or 1099 better for a veterinarian? Let’s just take what a W2 and 1099 mean, and then the employment relationship between both of those. And then kind of talk about which one is probably better for the vet. First, if you are a W2 employee, you are an employee, you’re not an independent contractor and you’ve signed an employment agreement. And so, the taxes will be taken out of whatever your compensation is on the biweekly, monthly basis, whatever their pay period it is. In a normal employment relationship, the benefits you’re going to get would be, they’re going to pay for your malpractice insurance, health, insurance, vision, dental, life, disability, retirement, they’ll pay for your license, DEA registration if necessary, credentialing, those types of things.

1099 in Urgent Care Medicine?

So, like they will pay for all the normal things that kind of go into being a vet. Whereas if you are a 1099, you are an independent contractor, you’ve signed an independent contractor agreement with the employer and you are not an employee, meaning, no taxes are taken out of your payment, so they’ll just pay you. And then ultimately, it will be your responsibility to then pay the state and the federal government for any of the taxes. Now, when you are an independent contractor, the employer, generally, isn’t going to provide any of those benefits at all. Sometimes, they’ll pay for the underlying malpractice insurance, although for vets, malpractice insurance is extraordinarily reasonable. I mean, for like a general vet, it could be $300 or $400 a year. They’re not going to pay for your license, for your DEA, they won’t provide benefits.

So, no health, vision, dental, disability, life retirement. You’re just not going to get that stuff if you’re an independent contractor. Why would you be an independent contractor if you’re not going to get any of those things? Well, I guess it would come down to compensation. You should make more theoretically as an independent contractor to kind of offset not getting all those benefits. If you’re going to have a hundred thousand dollars offer from an employer and when you’re going to be an employee and they’re offering you all those benefits and then they’re going to offer you a hundred thousand dollars to be an independent contractor and not offer any of those benefits, it’s just not as good of an offer.

For most independent contractors, you’d create an LLC and then you would expense all those things, but it’s also much more difficult to get any of the ancillary benefits when you’re completely on your own. Like, it’s very hard to find health, vision, dental, you can’t find disability, you can’t get life insurance obviously, and then you also must pay for your own things. The reason why, I mean, this is just the honest reason why most employers would pay as an independent contractor versus an employer or an employee, is they don’t have to pay employment tax. Employment tax is usually somewhere between 8% to 12%. So, they’re saving 12% on what your compensation is each year. They’re essentially treating you as an employee. They tell you where to go, how much you’re working, who to see, and so you’re really a quasi-employee and the employer is just trying to not have to pay employment tax.

The IRS lists a 20-factor test on kind of an analysis of if someone is an employee or an independent contractor. So, maybe look at that and say, alright, look, you’re not giving me or any of the benefits of being an employee, but you’re requiring me to do all the things that an employee would normally do. Being an independent contractor would make sense if it’s more of like a side gig. So, maybe you’re just doing moonlighting work for somebody. And it’s up to you how often you’re working, that would make sense to be an independent contractor. But if this is like a full-time job where you’re going in five days a week and you’re interacting with the vet tech, the front office and all the patients and all that kind of thing, it’s unlikely that you’re an actual independent contractor and it doesn’t make a lot of sense.

Overall, most of the time, it would make the most sense to be an employee, so you’d get a W2. It wouldn’t make sense to get a 1099 and be an independent contractor for it’s for a full-time job. Opinions on that may vary, but I just find overall most of the time, if an employer is offering an independent contractor position, they’re not actually an independent contractor.

Veterinarian Practice Tax Deductions

What are the tax deductions a veterinary associate can make if they are classified as an independent contractor? First, if you are an employee of a veterinary practice, you’ll receive W2 at the end of the year, and taxes will be withheld from your regularly scheduled paychecks. Whereas if you’re an independent contractor, you’ll receive a 1099 at the end of the year, and no taxes will be withheld from your compensation, you will be responsible for paying for all those taxes. What are the benefits of being an independent contractor? Well, it makes the most sense to be an independent contractor when you’re working part-time for an employer. For instance, maybe you’re in emergency veterinary care and you’re only going to work maybe one or two weekends a month.

In that situation, it doesn’t really make sense to be an employee. It makes more sense to be an independent contractor. As an employee, you will get all the ancillary benefits. The veterinary practice should pay for your licensing, DEA registration, continuing education reimbursement, signing bonus, and moving expenses if you’re moving from out of state. And then they’re also going to offer health, vision, dental, disability, and life retirement. The employer will cover all those things. When you are an independent contractor, you will get none of those things covered. You are responsible to pay for all of that yourself.  Now, does that mean you are at a disadvantage compensation-wise? Well, no, if you do the, I guess, correct things, and the correct things would be if you’re going to work as an independent contractor, you need to create an LLC.

Consultation with Chelle Law

When your veterinary contract is analyzed by an experienced attorney, you will find financial benefits which end up outweighing the cost of the review. Leave it to the experts. If you are in need of assistance with a veterinary agreement or contract analysis schedule a Veterinarian Agreement Review with Chelle Law today!