Dept of Labor changing rules for W2 vs 1099–thoughts?

[Thepassageofgas]

US Department of Labor announces proposed rule on classifying employees, independent contractors; seeks to return to longstanding interpretation | U.S. Department of Labor


So: is anyone concerned for how this may impact your 1099 situation? Does having an LLC or S-corp or C-corp protect you from the potential of being classified as an employee and therefore needing to pay payroll tax? I have an appointment with an attorney on Wednesday but I’m wondering what the collective thoughts are on this from the sage people here.

Thanks

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[Thepassageofgas]

You definitely need a lawyer for that.

I honestly don't see how somebody working regularly for the same places, in a job like anesthesia with very limited independence, could be ever considered a contractor if one were to look at it carefully.

Thanks for replying.
So: how then, do 1099 opportunities exist for docs? How have they been legal all this time? I’m not trying to not pay any taxes. It’s just that per diem rates at full time day hours are a lot more lucrative, and I want to pay back my student loans.

Are you W2? 1099? A partner? Other?

 

[deleted1147063]

Thanks for replying.
So: how then, do 1099 opportunities exist for docs? How have they been legal all this time? I’m not trying to not pay any taxes. It’s just that per diem rates at full time day hours are a lot more lucrative, and I want to pay back my student loans.

Are you W2? 1099? A partner? Other?

I'm W2. I rarely see 1099 per diems in my area. But AFAIK it differs around the country (hence I guess the tightening of the rules by the DOL).

Independent contractor (self-employed) or employee? | Internal Revenue Service

Learn how to determine whether a person providing a service to you is an employee or an independent contractor.

www.irs.gov

To me, as an amateur, an anesthesiologist who just shows up and works regularly and frequently for the same group is an employee. (I've always considered full-time 1099s as fishy.) One that provides anesthesia in an office to a surgeon, brings his own supplies and stuff, bills the patient separately, works in multiple offices, is a contractor. In-between, a sea of gray.

If you look like an employee, walk like an employee and quack like an employee, you're an employee (full- or part-time).

Again, talk to a lawyer, for your particular case and state.

 

[Dr. Rude]

I doubt this will do anything to contract workers who like their arrangements. It would blow up an entire infrastructure that tons of hospitals have built for call coverage in all specialties, not just anesthesia.

Also would require renegotiation of All existing contracts to now include retirement benefits and health insurance, cuz there’s zero chance a contractor will continue a contract without those things being deductible when they buy them.

This is meant for gig workers who drive Ubers, not highly trained workers who like different hospitals in their town

It is meant for wherever they can harvest revenue from.

 

[Thepassageofgas]

It is meant for wherever they can harvest revenue from.

Hi Dr Rude,
Can you speak to your current arrangement? Are you an employee? A partner? A 1099? Other? I'm trying to learn from as many experiences as possible.

 

[Thepassageofgas]

Again, it would require complete renegotiation of all existing 1099 contracts in medicine if it becomes standard for contractors to be considered employees. Not going to happen.

Are you presently a 1099? Can you comment on your experience with taxes?

 

[Dr. Rude]

Hi Dr Rude,
Can you speak to your current arrangement? Are you an employee? A partner? A 1099? Other? I'm trying to learn from as many experiences as possible.

I am ALMOST retired. They treat me as a W-2. I work for mental health and social interaction. Still do a few per diems with my long term hospital system. I Was a partner in a private practice. Signed on/bought out/sold out DEPENDING ON YOUR POINT OF VIEW for two five year contracts a dozen years ago.

From strictly a $ perspective 1099 is the way to go assuming the $$ are equal and you and your accountant are willing to be "aggressive"

 

[BLADEMDA]

• Align the department’s approach with courts’ FLSA interpretation and the economic reality test.
• Restore the multifactor, totality-of-the-circumstances analysis to determine whether a worker is an employee or an independent contractor under the FLSA.
• Ensure that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors.
• Revert to the longstanding interpretation of the economic reality factors. These factors include the investment, control and opportunity for profit or loss factors. The integral factor, which considers whether the work is integral to the employer’s business, is also included.

 

[BLADEMDA]

Are Doctors Independent Contractors or Employees? | Physician Contracts

Attorney Robert Chelle discusses whether doctors are independent contractors or employees. Results oriented employment contract review.

www.chellelaw.com

 

[BLADEMDA]

"People such as doctors, dentists, veterinarians, lawyers, accountants, contractors, subcontractors, public stenographers, or auctioneers who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors. However, whether these people are independent contractors or employees depends on the facts in each case. The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done."

IRS

 

[BLADEMDA]

Independent Contractor vs. Employee: Federal Appeals Court Instructs How to Structure Physician Agreements To Avoid Misclassification

While the use of independent contractors in the healthcare industry has been a longstanding practice, it is now front and center as the gig economy continues to expand across several industries and…

www.fisherphillips.com

 

[BLADEMDA]

Nimbus can comment on this article. This ruling applies to California only:

California Supreme Court Reclassifies Your Independent Contractors - California Society of Anesthesiologists

Until recently an anesthesia practice had two options for engaging anesthesiologists: employee or independent contractor.[1] The correct classification was (and continues to be) relevant for qualified retirement plan participation and other benefits, workers’ compensation insurance coverage...

csahq.org

Conclusion

Any anesthesia group contemplating hiring anesthesiologists as independent contractors needs to understand that the risk associated with that decision has not been eliminated by passage of AB 5 (Gonzalez). As such, the independent contractor relationship should be the result of mutual agreement between the group and the worker. A written ICA with appropriate terms is also essential.

Anesthesia groups also need to understand that AB 5 (Gonzalez) makes the former Borello rules applicable to physician independent contractors, but CRNA’s continue to be subject to the strict ABC test. One of the three ABC factors is that the Contractor’s services are “outside the usual course of the hiring entity’s business.” If that business is administering anesthesia to patients, the group cannot pass the test.

AB 5 Exempts Physicians – but Proceed with Caution - California Society of Anesthesiologists

Editor’s Note: Assembly Bill 5, authored by Assemblymember Lorena Gonzalez (D-San Diego) was one of the most publicized and contentious pieces of legislation introduced in the recently concluded legislative session. AB 5 intended to codify the California Supreme Court’s recent Dynamex decision...

csahq.org

 

[BLADEMDA]

Independent contractors typically set their own hours, procedures and other aspects of their work and can also serve other healthcare facilities. They generally don’t receive employment benefits such as paid time off or insurance coverage, and the practice does not have to withhold income, social security and Medicare taxes or pay unemployment wages.

Employees are generally subject to more rules about their daily work and given the protection and benefits of true employment. While they can be more expensive, they also present a more cohesive brand since they’re more likely to follow the procedures and uphold the image you want for your practice. They’re also more likely to build relationships with your patients, which in turn helps reduce patient turnover.

 

[nimbus]

Nimbus can comment on this article. This ruling applies to California only:

California Supreme Court Reclassifies Your Independent Contractors - California Society of Anesthesiologists

Until recently an anesthesia practice had two options for engaging anesthesiologists: employee or independent contractor.[1] The correct classification was (and continues to be) relevant for qualified retirement plan participation and other benefits, workers’ compensation insurance coverage...

csahq.org

Conclusion

Any anesthesia group contemplating hiring anesthesiologists as independent contractors needs to understand that the risk associated with that decision has not been eliminated by passage of AB 5 (Gonzalez). As such, the independent contractor relationship should be the result of mutual agreement between the group and the worker. A written ICA with appropriate terms is also essential.

Anesthesia groups also need to understand that AB 5 (Gonzalez) makes the former Borello rules applicable to physician independent contractors, but CRNA’s continue to be subject to the strict ABC test. One of the three ABC factors is that the Contractor’s services are “outside the usual course of the hiring entity’s business.” If that business is administering anesthesia to patients, the group cannot pass the test.

AB 5 Exempts Physicians – but Proceed with Caution - California Society of Anesthesiologists

Editor’s Note: Assembly Bill 5, authored by Assemblymember Lorena Gonzalez (D-San Diego) was one of the most publicized and contentious pieces of legislation introduced in the recently concluded legislative session. AB 5 intended to codify the California Supreme Court’s recent Dynamex decision...

csahq.org

Independent contractors typically set their own hours, procedures and other aspects of their work and can also serve other healthcare facilities. They generally don’t receive employment benefits such as paid time off or insurance coverage, and the practice does not have to withhold income, social security and Medicare taxes or pay unemployment wages.

Employees are generally subject to more rules about their daily work and given the protection and benefits of true employment. While they can be more expensive, they also present a more cohesive brand since they’re more likely to follow the procedures and uphold the image you want for your practice. They’re also more likely to build relationships with your patients, which in turn helps reduce patient turnover.

Our group has always been W2 but a lot of groups and AMCs continue to stay 1099. A close friend just signed a 2 year 1099 contract with an AMC. As the article states, there is a risk of being reclassified. Full time 1099 anesthesiologists definitely do not set their own hours. Ironically the push to recategorize contractors to employees started because they wanted to offer employee protections to UBER/Lyft drivers who actually can set their own hours.

 

[Thepassageofgas]

Our group has always been W2 but a lot of groups and AMCs continue to stay 1099. A close friend just signed a 2 year 1099 contract with an AMC. As the article states, there is a risk of being reclassified. Full time 1099 anesthesiologists definitely do not set their own hours. Ironically the push to recategorize contractors to employees started because they wanted to offer employee protections to UBER/Lyft drivers who actually can set their own hours.

This is where it gets a little hazy for me. So far, my 1099 experience has been, tell us your days and hours you are available and we’ll put you on the schedule when you want. So I definitely set my own hours, in that i don’t work when i don’t want to. Yes, i start the day when it’s expected because OR start times are dictated, but I certainly am not obligated to take call/stay late—unless i want to. Is that not considered making your own hours in the eyes of the law?

 

[BLADEMDA]

This is where it gets a little hazy for me. So far, my 1099 experience has been, tell us your days and hours you are available and we’ll put you on the schedule when you want. So I definitely set my own hours, in that i don’t work when i don’t want to. Yes, i start the day when it’s expected because OR start times are dictated, but I certainly am not obligated to take call/stay late—unless i want to. Is that not considered making your own hours in the eyes of the law?

Yes, you are correct in terms of hours but if you decide to stay on for more than 1 year things get murky. Are you working anywhere else? A 1099 who only works at one facility for more than 1 year runs the risk of being classified as an employee. That’s why true 1099 workers should have other locations they at least dabble at to prove to the IRS they aren’t employees of any one company. Of course, you are a small fish in a big pond so the irs will likely never bother you about your 1099 status.

 

[nimbus]

This is where it gets a little hazy for me. So far, my 1099 experience has been, tell us your days and hours you are available and we’ll put you on the schedule when you want. So I definitely set my own hours, in that i don’t work when i don’t want to. Yes, i start the day when it’s expected because OR start times are dictated, but I certainly am not obligated to take call/stay late—unless i want to. Is that not considered making your own hours in the eyes of the law?

My friend’s 1099 group operates almost exactly the same as my w2 group. Every full time person is expected to work full time, they have a vacation lottery in October for the following year, etc. They take more frequent overnight call than we do, 6-7 nights/month. They have 35-40 people in their group. Mostly full timers with an handful of part-timers. Maybe the “part-timers” can work when they want. Overall their schedule is much worse than ours and they work harder than we do. He definitely can’t just “work when he wants”. He’s complained to me a lot about that because he has a major nonanesthesia sideproject and would love more flexibility. His new 1099 contract with a different employer requires him to give them 42weeks of work/year including 17 weeks of heart call coverage/year. The 10 remaining weeks are his to do whatever he wants.

The advantages for them are that they can write off car leases and their contract requires them to maintain a home office which adds another deduction for them.

 

[chessknt]

My friend’s 1099 group operates almost exactly the same as my w2 group. Every full time person is expected to work full time, they have a vacation lottery in October for the following year, etc. They take more frequent overnight call than we do, 6-7 nights/month. They have 35-40 people in their group. Mostly full timers with an handful of part-timers. Maybe the “part-timers” can work when they want. Overall their schedule is much worse than ours and they work harder than we do. He definitely can’t just “work when he wants”. He’s complained to me a lot about that because he has a major nonanesthesia sideproject and would love more flexibility. His new 1099 contract with a different employer requires him to give them 42weeks of work/year including 17 weeks of heart call coverage/year. The 10 remaining weeks are his to do whatever he wants.

The advantages for them are that they can write off car leases and their contract requires them to maintain a home office which adds another deduction for them.

Eh the contract could also require them to have a pool and eat prime grade aged beef every night but that doesn't mean it is a real write off that can survive an audit. Remember a home office is a room in your home you use for no other purpose besides work regularly--is he really going in to his home office multiple times a week when working to go do work and then never uses it the rest of the time? When you start to show intent to misconstrue your deductions you cross the line from an error in to fraud. I am truly hope our audit rates go way up because people are way too comfortable bull****ting the IRS these days since they are so poorly funded.

 

[dannyboy1]

This is where it gets a little hazy for me. So far, my 1099 experience has been, tell us your days and hours you are available and we’ll put you on the schedule when you want. So I definitely set my own hours, in that i don’t work when i don’t want to. Yes, i start the day when it’s expected because OR start times are dictated, but I certainly am not obligated to take call/stay late—unless i want to. Is that not considered making your own hours in the eyes of the law?

Similar in my shop. We have the day/call schedule filled out a month in advance. Where there are holes we ask the locums/per diem for availability. They work on an hourly basis and get no PTO so it sounds like 1099 to me…

 

[nimbus]

Similar in my shop. We have the day/call schedule filled out a month in advance. Where there are holes we ask the locums/per diem for availability. They work on an hourly basis and get no PTO so it sounds like 1099 to me…

Sounds like we are talking about 2 different situations. In our area, there are full-time full-call taking anesthesia jobs that are paid on a 1099. 1099s are not just reserved for per diem/fill in/part time work. Are the doctors used to fill out the bulk of the schedule a month in advance 1099 or w2?

 

[CubsDynasty]

Home office for anesthesia has been discussed in most 1099 threads on this website. There’s legal precedent so its a given.

 

[chessknt]

You have made this exact point before. The precedent mentioned last time still holds true. This has been litigated in the highest tax court, and Home offices are legitimate for anesthesiologists and many other medical professionals who don’t actually handle medical records work at home. I do not personally take a home office deduction and have no skin in the game here, but I know tons of people who do, and they would win in tax court if the irs audited them.

https://www.washingtonpost.com/archive/business/1992/10/04/anesthesiologist-takes-on-the-high-court-over-home-offices/b58386ac-2c0c-4f2c-9f29-106a664a5316/

It is a legitimate expense when you actually with a straight face can say you use it as a home office. Stare decisis got cancelled earlier this year so we'll see. Like I said I am excited to see the audit rates go up and see some of the outright fraud get dragged in to the light but in reality probably nothing will happen since Congress will probably stop it anyways if it starts to gain traction.

 

[Thepassageofgas]

Stare decisis isn’t cancelled in non politically charged cases, that much I guarantee you.

I imagine the straight faced people includes 99% of people who use the home office deduction. Theres tons of legitimate business that contract physicians do from home, as I also outlined in the other thread.

Besides, nothing happens if you do claim a deduction and get flagged. They just disallow it and you pay the fine. 99% of cases are legitimate even in an audit. What is the IRS gonna do, track whether your spouse uses your home office to browse Amazon? They aren’t gonna get busted like Al Capone or something

I was wondering about this as well. My partner and I share an office and our animals usually sit with us while i’m answering emails and he’s gaming or some such.

Yes, you are correct in terms of hours but if you decide to stay on for more than 1 year things get murky. Are you working anywhere else? A 1099 who only works at one facility for more than 1 year runs the risk of being classified as an employee. That’s why true 1099 workers should have other locations they at least dabble at to prove to the IRS they aren’t employees of any one company. Of course, you are a small fish in a big pond so the irs will likely never bother you about your 1099 status.

thanks for replying.

so i split my time between four different hospitals (three different primary groups covering them), a network of GI centers (also covered by one of those three groups) and surgery centers (same).

 

[nimbus]

so i split my time between four different hospitals (three different primary groups covering them), a network of GI centers (also covered by one of those three groups) and surgery centers (same).

Then you’re safe even beyond 1 year. I was talking about people who exclusively or almost exclusively work with one group on a 1099 basis. Looks like you’re a part-timer in 3 separate groups and work at your pleasure. Truly an independent contractor.