Independent contractors in the ED

[foley08]

So I responded to an older thread when searching for information on independent contractor positions and then realized it was in a state specific forum and not many people would probably see it.

 

I am about to start an ED job (my first woo!) and the ED is staffed by an outside company, so the PAs and docs are not hospital employees but rather independent contractors of this outside company.

 

I've just been trying to educate myself on the financial/tax side of this and it seems that in the ED setting there are many benefits to the company and few for the independent contractor. Is this a common set-up in EDs? Is there any benefit to setting up an LLC? rcDavis has responded to a few threads on this topic with the fact that as an IC one can contribute more to a retirement plan than as an employee, so thanks for that info.

 

In doing some internet research it seems that the IRS has a big problem with people being incorrectly labeled as ICs but this is a pretty big company and I assume they have consulted tax lawyers etc. I'm just curious as to how they get away with claiming we are ICs? When looking at a lot of the questions used to classify an employee we don't seem to really fit the true IC mold.

 

Anyway, maybe some of my fellow ICs could give me an idea of some items I will be able to claim. The fact that ICs can claim a wider variety of deductions seems to be a plus but since I can't foresee many fixed business expenses this doesn't seem to be a huge advantage.

[burnpac]

So I responded to an older thread when searching for information on independent contractor positions and then realized it was in a state specific forum and not many people would probably see it.

 

I am about to start an ED job (my first woo!) and the ED is staffed by an outside company, so the PAs and docs are not hospital employees but rather independent contractors of this outside company.

 

I've just been trying to educate myself on the financial/tax side of this and it seems that in the ED setting there are many benefits to the company and few for the independent contractor. Is this a common set-up in EDs? Is there any benefit to setting up an LLC? rcDavis has responded to a few threads on this topic with the fact that as an IC one can contribute more to a retirement plan than as an employee, so thanks for that info.

 

In doing some internet research it seems that the IRS has a big problem with people being incorrectly labeled as ICs but this is a pretty big company and I assume they have consulted tax lawyers etc. I'm just curious as to how they get away with claiming we are ICs? When looking at a lot of the questions used to classify an employee we don't seem to really fit the true IC mold.

 

Anyway, maybe some of my fellow ICs could give me an idea of some items I will be able to claim. The fact that ICs can claim a wider variety of deductions seems to be a plus but since I can't foresee many fixed business expenses this doesn't seem to be a huge advantage.

 

Congrats on the job!

 

At least in California, PAs don't meet the criteria to be considered ICs by any stretch of the definition. In my opinion, this is probably the state of affairs in most if not all states. This doesn't stop many physicians groups for trying to treat PAs this way. There are numerous advantages to the employer to treat you like an IC, and few benefits to you unless they compensate you very handsomely. The employer avoids employer taxes on payroll, overtime, breaks, PTO, and a host of other benefits that employees come to expect. The IC loses out on unemployment insurance, employer contributions to SSI, OT, PTO, insurance, etc., and must take responsibility for filing taxes as an IC. A typical benefit package for a PA is probably upwards of 30% of your total compensation.

 

The only way that the employer gets investigated for mis-categorizing a PA or other workers as an IC is if an employee files a wage and hour claim with the department of labor and the employer is investigated. They liabilities are all on the employer side, and they would be the ones liable for back OT pay, and taxes and penalties. They may dangle a couple of more dollars an hour to make you think you are getting more, but it has to be a lot more to make up for what you are giving up as an IC.

 

I hired an attorney (he had been legal counsel to CAPA for a couple of decades) who was well versed in these areas when I set up my staffing corporation, and he and the firm's labor attorneys advised me that it was too risky to treat the PAs that I hired as ICs, and could be extremely costly to deal with a complaint, investigation and judgement. The only way that a PA in California can be treated in a manner similar to an IC is to form a corporation, and then contract with entities as a "leased employee." While I no longer hire and employ PAs, I have maintained my corporation, and I'm the only employee. I pay myself a salary, and all my employer taxes are paid by the corporation as required by law. I currently contract with a couple of medical groups and an IPA (for which I direct bill first assist), and the parties with which I contract can legally treat me as an "IC", and avoid any scrutiny from the IRS. There are still caveats according to my attorney, and my advice to you is to run anything like this past an attorney in your state who has worked with PAs and understand your labor laws.

 

I'm really glad that I set up my PA corporation in 2005, and it has allowed me much more freedom in my retirement planning, and allowed me to expense things through my corporation necessary to running my business. If you are going to be treated as an IC anyway, my recommendation would be to incorporate, and to negotiate a rate of pay that meets all of your obligations as an employer, and provides you with a decent living. That is the rub. Your employer wants to treat you like an IC to save money, and pocket the difference, not hand it over to you. It has been a significantly positive economic benefit to me and my family to go this route, but it may not be best in every situation.

 

You need to always involve competent legal counsel when mulling these sorts of decisions.

[ventana]

Congrats on the job!

 

At least in California, PAs don't meet the criteria to be considered ICs by any stretch of the definition. In my opinion, this is probably the state of affairs in most if not all states. This doesn't stop many physicians groups for trying to treat PAs this way. There are numerous advantages to the employer to treat you like an IC, and few benefits to you unless they compensate you very handsomely. The employer avoids employer taxes on payroll, overtime, breaks, PTO, and a host of other benefits that employees come to expect. The IC loses out on unemployment insurance, employer contributions to SSI, OT, PTO, insurance, etc., and must take responsibility for filing taxes as an IC. A typical benefit package for a PA is probably upwards of 30% of your total compensation.

 

The only way that the employer gets investigated for mis-categorizing a PA or other workers as an IC is if an employee files a wage and hour claim with the department of labor and the employer is investigated. They liabilities are all on the employer side, and they would be the ones liable for back OT pay, and taxes and penalties. They may dangle a couple of more dollars an hour to make you think you are getting more, but it has to be a lot more to make up for what you are giving up as an IC.

 

I hired an attorney (he had been legal counsel to CAPA for a couple of decades) who was well versed in these areas when I set up my staffing corporation, and he and the firm's labor attorneys advised me that it was too risky to treat the PAs that I hired as ICs, and could be extremely costly to deal with a complaint, investigation and judgement. The only way that a PA in California can be treated in a manner similar to an IC is to form a corporation, and then contract with entities as a "leased employee." While I no longer hire and employ PAs, I have maintained my corporation, and I'm the only employee. I pay myself a salary, and all my employer taxes are paid by the corporation as required by law. I currently contract with a couple of medical groups and an IPA (for which I direct bill first assist), and the parties with which I contract can legally treat me as an "IC", and avoid any scrutiny from the IRS. There are still caveats according to my attorney, and my advice to you is to run anything like this past an attorney in your state who has worked with PAs and understand your labor laws.

 

I'm really glad that I set up my PA corporation in 2005, and it has allowed me much more freedom in my retirement planning, and allowed me to expense things through my corporation necessary to running my business. If you are going to be treated as an IC anyway, my recommendation would be to incorporate, and to negotiate a rate of pay that meets all of your obligations as an employer, and provides you with a decent living. That is the rub. Your employer wants to treat you like an IC to save money, and pocket the difference, not hand it over to you. It has been a significantly positive economic benefit to me and my family to go this route, but it may not be best in every situation.

 

You need to always involve competent legal counsel when mulling these sorts of decisions.

 

did you set up as a Sub S, LLC or C-corp?

 

Looks like C-corp is the safest, and most flexible, but runs the risk of double taxation if you make a profit (why you would allow a company to make a profit that you own is beyond me...)

 

thinking of a C-corp for my self - with 99% owned by me and then I can bill medicare direct as long as I have an SP on the payroll and bill through my corp and i have a signed "assignement of benefits" to the corporation

[burnpac]

did you set up as a Sub S, LLC or C-corp?

 

Looks like C-corp is the safest, and most flexible, but runs the risk of double taxation if you make a profit (why you would allow a company to make a profit that you own is beyond me...)

 

thinking of a C-corp for my self - with 99% owned by me and then I can bill medicare direct as long as I have an SP on the payroll and bill through my corp and i have a signed "assignement of benefits" to the corporation

 

This is precisely why you need legal advice.

 

I started as a C corp as I had a partner. While the stock split was 90:10, the shareholder's agreement was 55:45. Once my partner moved away and I stopped doing the staffing gig. I went to an S corp at the advice of my attorney and accountant. With and S corp, the stock split is the profit split, so it is less flexible in that regard.

 

The only direct billing that I do is for first assist, and nearly all of our private patients are either through the IPA at the hospital at which we operate (prisoners and some private insurances), or Kaiser Permanente patients. It is my understanding that if I did have a Medicare patient, I could direct bill first assist and would be reimbursed at 85%. this is a question I would run past Michael Powe at the AAPA. It hasn't come up yet for me except that I have had one federal prison payor reduce my fee to 85% of what would have been allowable based on the Medicare rules, which they used for reimbursement.

 

As for my other gigs, I either get paid a monthly or hourly fee for "PA services," and the practice does all the billing.

 

Regardless, there is no "profit". Anything in excess of the fiscal year's business expenses makes a nice employer contribution to my 401 (k) at the end of the year. This is made easy as I'm the only employee, and there are no "fairness" issues with profit sharing in this situation.