Are you an independent contractor or an employee?

Whether you're looking for a job or hiring staff for your practice, it's essential that you understand the difference between an employee and independent contractor.

Employment Practices

Are You an Independent Contractor or an Employee?

The day you have been dreaming about finally comes! You have been offered a position in an office that is sure to fulfill your dreams of taking care of patients, learning from a mentor and supporting you and your family.  You may have been offered a position as an independent contractor or an employee. Or maybe you're the hiring D.C. who has finally found the right individual who will fit in well with other staff and who you believe patients will appreciate.

In either case - as the hiring D.C. or the D.C. being hired - the decisions and choices you make will not only affect you for the rest of your life but may have financial consequences for each of you.

As a business owner, it is crucial that the correct classification is assigned to the new doctor coming into the office. As an employer, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee.

Hiring the new doctor as an independent contractor may seem more favorable since you will not have to withhold or pay any taxes on payment to an independent contractor. In this case, the Internal Revenue Service has deemed specific tests to determine if the new doctor coming into the office is an employee or an independent contractor.

Questions to ask of the parties involved:

  • Does the business have the right to direct and control the worker?
  • Does the business have the right to control how the work is performed?
  • Does the business control how, where, or when to do the work?
  • Does the business control what equipment or tools are to be used in the office?
  • Does the business control what assistants will help to perform the work?
  • Does the business control where to purchase supplies?
  • Will the business provide the doctor with training about required procedures and methods?
  • Does the business or the director of the clinic control your hours or time off?
  • As an employee or independent contractor do you receive any benefits?

If you have answered yes to any of these questions, then it is most likely that the IRS will deem the new doctor as an employee.  In addition to back taxes, the parties involved may be subject to other fines from the state for lack of worker’s compensation coverage or payment of unemployment insurance.

It is always best to check with a certified public accountant (CPA) to make sure you are following the letter of the law.

For additional information, visit the IRS website here

The information in the NCMIC Learning Center is offered solely for general information and educational purposes. It is not offered as, nor does it represent, legal or professional advice. Neither does this information constitute a guideline, practice parameter or standard of care. You should not act or rely upon this information without seeking the advice of an attorney familiar with the specific legal requirements of the state(s) in which you practice. If there is a discrepancy between the site and an insurance policy you have with NCMIC, the policy will prevail.