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What constitutes a W2 vs 1099? (Physician)

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  • What constitutes a W2 vs 1099? (Physician)

    I posted the message below over at BH, but wanted to also ask here for more physician specific experiences as well:

    I am a member of a private anesthesiologist group that currently pays two semi-retired anesthesiologists on a daily rate on the occasion they are needed. They were hired as W2 employees, even though they both had been paid as 1099s throughout their prior careers and desired to remain 1099 if possible. As W2 employees they receive benefits in terms of health insurance, etc. Several issues have arisen with this arrangment.
    We have started to look at the option of a defined benefit plan/cash benefit plan, but it appears this would necessitate a contribution from the group on their behalf as they are unlikely to qualify as highly compensated employees. They also have no desire to stay with the current health plan that we have and would like to find their own. Obviously, if they were 1099 independent contractors they could explore more options and deduct their premiums. One of the MDs works at other locations (as a 1099) on days we do not need him, while the other does not. They do not "depend" on employment from us, but work only to pad their retirement.
    We have discussed this with our CPA who really has not given a great deal of insight. I have been unable to find anyone else willing to help us with this decision. I also understand it may raise "suspicion" making a W2 employee a 1099 independent contractor. I just wondered if any may have had similar situations or some insight.

  • #2
    There are many physicians in this situation who are paid as ICs. Technically, they should hold themselves out to work at other entities (as one of them already does), have a contract with your organization, and submit an invoice for services rendered.

    A few issues that must be considered before making this change are:

    • Workmen's comp - they should have their own policies,

    • Unemployment - you need to have some level of assurance that the worker will not file for benefits if laid off, and

    • The retirement plan - if things went south and the IC workers wanted to make a stink because they wanted coverage, that's a possibility.

    Given your facts and the fact that these arrangements are fairly typical, I'd say the possibility of the above is remote, but these are issues your CPA can discuss with you. I doubt I would have any problem blessing this arrangement (without knowing more, I cannot be certain).
    Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087