What is a 1099 Veterinarian? | Veterinarians

What is a 1099 veterinarian?  If you’re a vet, you will have two opportunities: either to work as an employee for a corporate-owned practice or a clinic or you could work as an independent contractor. Maybe if you’re doing part-time work on the side. A 1099 is considered an independent contractor. You’ll receive a 1099 at the end of the year, and then the vet would be responsible for paying any of the self-employment tax associated with the compensation received. No taxes are going to be withheld at all from any compensation received when you’re a 1099 independent contractor. If you are an employee, you’ll be considered a W2 employee, and then taxes will be withheld throughout the year for whatever the regularly scheduled payroll is.

Advantages and Disadvantages of an Independent Contractor

Now, what are the benefits and drawbacks of being an independent contractor? Well, first, the setting is important. Most of the vets who worked as independent contractors are doing part-time work or maybe they’re in a specialty that would require them to work for multiple referral sources or employers. And so, it would make sense maybe if the work is infrequent or sporadic for them to work as an independent contractor. If you’re like a veterinary associate and you’re looking to join a corporate-owned practice, you’re going to be an employee. You’re not going to be an independent contractor. And as an employee, as I said before, you’re W2 and then they’re going to pay for health, vision, dental, disability, life insurance, they’re going to pay for your vet license, DEA, registration, continuing education.

You’re going to get paid time off. Whereas as an independent contractor, working as a 1099, you’re not going to receive any of those things. You are going to be responsible to pay for all those things. Now, a smart 1099 would create an LLC, and then they would get a tax, they would create a bank account just for that LLC, and then they would run all compensation and expenses through that. And then you can tax deduct almost all the things that I just mentioned, the license, DEA, insurance, malpractice, all that stuff can be then ultimately deducted at the end of the year. If you’re thinking of working as a 1099, you should hook up with an accountant prior to doing anything. They can take you through the process of how to create the LLC and then what are the best ways of maximizing your tax deductions. Other topics of interest include:

• Veterinarian Independent Contractor Tax Deductions
• Pros and Cons of Employment at a Corporate Veterinary Office

There are some situations where you would work for a vet clinic, and they would misclassify you. Most of the time when that happens, usually I find it’s like a vet-owned practice and they just simply don’t want to pay the employment tax on having an employee. So, they classify them as an independent contractor. They pay them as an independent contractor, but almost all the actions from the vet are that of an employee. The IRS has a 20-factor test on their website. If you think you may be classified as an independent contractor, but not actually working like that, I’d look at the test and then discuss it with the employer. If there’s audit and the IRS comes back and says, no, you’ve misclassified this person, there will be back taxes that need to be owed.

And in some contracts, I’ve seen that the employer will state that the employee or independent contractor is responsible for any of those penalties, which is absolutely ridiculous, but you need to check into the contract and make sure there is no language that states if there’s any  misclassification problem and an audit is done and there are penalties associated with it, that the vet is not the one responsible for paying those fees. As I said before, the best place to work as an independent contractor is when you’re doing part-time work, or maybe it’s completely up to you. A lot of people who do equine work, they’ll work on call or maybe one day a week or a month. In those scenarios, it doesn’t make sense to be classified as an employee. It would make more sense to be an independent contractor. But most of the time, most vets work as employees, not independent contractors.

Practice Employment Designation

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.

W2 for Employees

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 a 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. So, they will pay for all the normal things that kind of go into being a vet.

1099 for Independent Contractors

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.

Relief Veterinarians

So, no health, vision, dental, disability, or 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. Veterinary independent contractors may also work as relief veterinarians, filling in for a permanent staff member who is unavailable.

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, and 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.

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!