any downsides to being IC vs employed?

[finalpsychyear]

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I don't think there is any tax difference between the IC and employed provided you have a competent accountant you can come out ahead as an IC. Why aren't more people doing this then people employed. Am i missing something?

1. Taxes : advantage IC
2. Malpractice: mine gives it to me but for my additional part time PP i pay $1500
3. Health Insurance: I'm doing 3 mo short term plans for 100 bucks a month for single person
4. Pension: SEP/401K : advantage IC
5. Job security: advantage IC as you can be fired from either on the spot but most have a 30 day notice if IC work.

What am i missing here? I will get a better health insurance next year once open market crap starts and have the HSA. Also, everything from my premium for health, hsa, and malpractice, retirement, leased car and half of FICA are all write offs plus a ton of other things i'm missing.

Seems to0 good to be true.

 

[futuredo32]

I don't think there is any tax difference between the IC and employed provided you have a competent accountant you can come out ahead as an IC. Why aren't more people doing this then people employed. Am i missing something?

1. Taxes : advantage IC
2. Malpractice: mine gives it to me but for my additional part time PP i pay $1500
3. Health Insurance: I'm doing 3 mo short term plans for 100 bucks a month for single person
4. Pension: SEP/401K : advantage IC
5. Job security: advantage IC as you can be fired from either on the spot but most have a 30 day notice if IC work.

What am i missing here? I will get a better health insurance next year once open market crap starts and have the HSA. Also, everything from my premium for health, hsa, and malpractice, retirement, leased car and half of FICA are all write offs plus a ton of other things i'm missing.

Seems to0 good to be true.

Now that you are young healthy and single, you don't need great insurance. IF you insure others, or as you get older of if you develop an illness requiring frequent medical care, your insurance premiums will rise. I am not that old, but do need frequent medical attention and have the best insurance I could buy being not employed and I pay over $800 a month. It's amazing insurance and I use it like crazy and it's worth it, but I had better insurance with a low deductible during my TRI and my first psych residency. When is the open market crap going to stop?? Who knows?
You have to spend a certain amount per year on health care expenses for them to be tax deductible.
Your IC job gives you money for a 401k? Mine doesn't.
Many employed positions have great health insurance with a low deductible, retirement fund matching or something similar, student loan repayment, paid vacation, paid CME days, money for CME courses and travel, and job security. You can write a third off as business expense but not all. I just went to a board prep course and between the course and hotel/flight it was 3k, I can claim 1/3. If I were employed, a lot give you that much for CME related expenses a year. If you are sick or don't work a day as an IC you don't get paid, no paid days off.

There are plusses and minuses. I also have a small private practice so maybe the benefits are better if you are just an IC and not a solo enterprise or whatever I am.

 

[finalpsychyear]

Now that you are young healthy and single, you don't need great insurance. IF you insure others, or as you get older of if you develop an illness requiring frequent medical care, your insurance premiums will rise. I am not that old, but do need frequent medical attention and have the best insurance I could buy being not employed and I pay over $800 a month. It's amazing insurance and I use it like crazy and it's worth it, but I had better insurance with a low deductible during my TRI and my first psych residency. When is the open market crap going to stop?? Who knows?
You have to spend a certain amount per year on health care expenses for them to be tax deductible.
Your IC job gives you money for a 401k? Mine doesn't.
Many employed positions have great health insurance with a low deductible, retirement fund matching or something similar, student loan repayment, paid vacation, paid CME days, money for CME courses and travel, and job security. You can write a third off as business expense but not all. I just went to a board prep course and between the course and hotel/flight it was 3k, I can claim 1/3. If I were employed, a lot give you that much for CME related expenses a year. If you are sick or don't work a day as an IC you don't get paid, no paid days off.

There are plusses and minuses. I also have a small private practice so maybe the benefits are better if you are just an IC and not a solo enterprise or whatever I am.

If you are self employed, your entire 800 month health premium is tax deductible along with whatever you contribute to your HSA accounts for the year. Also, your board prep/travel/flight/food should be largely all tax deductible def not just 1/3.

You are correct about paid vacation and sick days. My health insurance is the best company in the state but i have a 5000 deductible then i think they pay 90% so it is ok for now. The best thing is being my own boss and that is something every one of you on here i truly wish experience. I would earn less but decide my hours, vacation, then let some bachelors degree fool dictate any of that. All the best to you on your boards.

 

[AD04]

I don't think there is any tax difference between the IC and employed provided you have a competent accountant you can come out ahead as an IC. Why aren't more people doing this then people employed. Am i missing something?

1. Taxes : advantage IC
2. Malpractice: mine gives it to me but for my additional part time PP i pay $1500
3. Health Insurance: I'm doing 3 mo short term plans for 100 bucks a month for single person
4. Pension: SEP/401K : advantage IC
5. Job security: advantage IC as you can be fired from either on the spot but most have a 30 day notice if IC work.

What am i missing here? I will get a better health insurance next year once open market crap starts and have the HSA. Also, everything from my premium for health, hsa, and malpractice, retirement, leased car and half of FICA are all write offs plus a ton of other things i'm missing.

Seems to0 good to be true.

The majority of the former residents from my program transitioned into employed attending positions. IMO, that is the wrong way to do it.

The US tax code favors business owners over employees. Business owners tend to earn more per hour. They get to keep more too (thanks to all the deductions they can take). They also have more freedom. I really don't see why any doctor with an ounce of initiative would be an employee.

It is more hassle at first to be your own boss at first, but business isn't that hard to learn. (It is certainly much easier than medicine for me.) The pay off will be worth it.

You're right about the security aspect too. If you're a competent physician and you're able to land multiple sources of contracting gigs, no one can every fire you. There was a poster a few months back who said he had 10 gigs or so and earned 7 figures a year. And he started a practice practice on the side. He's as secure as any government employee.

The majority of the financially successful contributors to SDN are business owners.

I'm soon joining the real world and I'm planning the next stage of my life. I've ruled out employed positions (unless they pay very very well with no non-compete, no indemnification clause, no locked in period, and whatever other sneaky crap employers use to trap and transfer risks to doctors) and am focusing mainly on contractor positions.

Read The White Coat Investor: A Doctor's Guide To Personal Finance And Investing. Your mind will be blown by the possibilities of being a business owner and how you can transition your high income into wealth.

 

[futuredo32]

If you are self employed, your entire 800 month health premium is tax deductible along with whatever you contribute to your HSA accounts for the year. Also, your board prep/travel/flight/food should be largely all tax deductible def not just 1/3.

You are correct about paid vacation and sick days. My health insurance is the best company in the state but i have a 5000 deductible then i think they pay 90% so it is ok for now. The best thing is being my own boss and that is something every one of you on here i truly wish experience. I would earn less but decide my hours, vacation, then let some bachelors degree fool dictate any of that. All the best to you on your boards.

No, business expenses are only reimbursed 1/3. Last year I was able to deduct my healthcare expenses but the year before they weren't 20 % of my income, I made too much . How are you your own boss when you are an IC?? You are still working for someone else, no? I work one day a week at a clinic as an independent contractor, I feel like I work FOR that clinic. If I want time off I have to let the owner know. He wants to know by sometime in Sept if I will work one or two more days a week for him. I see whatever patients they want me to.

I have a small private practice, I feel like that is mine. I don't ask or tell anyone I am not working Wednesday, I just don't schedule patients Wed. If I want to work a little extra I can for awhile and then decide I don't want to work Fridays anymore. I pick my patients. I screen them when they call to make an initial appointment and if for some reason I don't think it's a good fit I don't take them on as a patient. A few patients in my private practice I have opted to terminate the doctor/patient relationship with- for good reasons on my part. But, at the clinic where I am an IC or the hospital where I work as a locums, I have to see anyone and everyone. In my pp, I can do therapy with patients and I pick which patients. I am just managing meds where I work as an IC. They have social workers to do the therapy. I did negotiate an hourly rate unlike the other psychiatrists who work there and probably have a 70/30 arrangement. In my private practice I charge full fee for missed appointments. Where I work as an IC they only charge $25 for a missed appointment.

So I am thinking that after the boards I either need to work an extra day in my private practice OR work one more day where I am an IC. Where I work as an IC they have to be losing money on me, their no show rate is fairly high. I can't imagine he would pay me hourly for two or three days.

Personally I feel like working as an IC is just like working for someone else, not being self employed. My private practice, that is self employed at least to me.

Thanks for the well wishes on the boards. I need it BIG.

 

[Jules A]

When you are young and unattached the odds are it won't matter for now. I struggle with this as a 0.6 FTE at a major medical center with a good benefit package. I would like to move on but it all comes down to the numbers. On first glance the insurance, time off, CME etc total about $40,000 a year. Considerations include it would be unlikely I could secure health insurance of that quality on my own. The big hold for me is FMLA, short and long term disability. As someone older the chance of needing those is increasing. Those benefits have the possibility of being a significant chunk of change that I would not get elsewhere. Unfortunately due to pre-existing I'm not eligible for m own LTD or LTC insurance regardless of the price.

 

[splik]

It is true you have a tax advantage which can be substantial but all of the other things are potentially better for employees. Malpractice should be covered for employees and you can get much better health insurance for much less. I have a $0 deductible for in-network care and $20 co-pay for visits with an out of pocket maximum of ?5k. Also I would get a pension. I would estimate that based on current projections if I stayed working for the current employer my basic pension would work out at about 245k/yr paid to me which is not including the additional 5% of income my employer contributes to another plan and another 7% I contribute to my retirement plan. IC technically have none of the job security you mention because you are not an employee thus have no employment rights, cannot be fired because you are not employed but can have your contract terminated fairly easily, whereas employees may be protected against discrimination, harassment, unfair dismissal etc. In many employed positions its pretty near impossible for a psychiatrist to be fired. In fact one place I interviewed insisted on doing multiple day-long interviews on the rationale "we won't be able to fire you if things don't work out".

In addition I get vacation (5 weeks), professional leave (about 4 weeks per yr), sick leave (months of it), maternity leave is 12 weeks paid, parental leave 4 weeks, some jobs give you sabbaticals or other paid long-term professional leave, in addition to strong disability plans for short-and long term disability. whereas as an IC you have to save away a lot to protect against serious illness or injury which could seriously impact you.

employed positions are not all equal of course, it depends on the job and the benefits. Ultimately it depends on the individual to decide what kind of work they want to do. The ideal is probably to have a w2 job with good benefits and also have your own business.

 

[zolof]

It is true you have a tax advantage which can be substantial but all of the other things are potentially better for employees. Malpractice should be covered for employees and you can get much better health insurance for much less. I have a $0 deductible for in-network care and $20 co-pay for visits with an out of pocket maximum of ?5k. Also I would get a pension. I would estimate that based on current projections if I stayed working for the current employer my basic pension would work out at about 245k/yr paid to me which is not including the additional 5% of income my employer contributes to another plan and another 7% I contribute to my retirement plan. IC technically have none of the job security you mention because you are not an employee thus have no employment rights, cannot be fired because you are not employed but can have your contract terminated fairly easily, whereas employees may be protected against discrimination, harassment, unfair dismissal etc. In many employed positions its pretty near impossible for a psychiatrist to be fired. In fact one place I interviewed insisted on doing multiple day-long interviews on the rationale "we won't be able to fire you if things don't work out".

In addition I get vacation (5 weeks), professional leave (about 4 weeks per yr), sick leave (months of it), maternity leave is 12 weeks paid, parental leave 4 weeks, some jobs give you sabbaticals or other paid long-term professional leave, in addition to strong disability plans for short-and long term disability. whereas as an IC you have to save away a lot to protect against serious illness or injury which could seriously impact you.

employed positions are not all equal of course, it depends on the job and the benefits. Ultimately it depends on the individual to decide what kind of work they want to do. The ideal is probably to have a w2 job with good benefits and also have your own business.

Employed positions are not equal. You definitely said it. If I saw that type of vacation and additional leave then I would consider an employed job. So far the IC jobs I have had just had been so much better pay and flexible at least in my locations. Also many employed jobs that offered me positions, had good perks but had a noncompete, so look out for that.