Indenpedent contractor Vs employee status

This forum made possible through the generous support of SDN members, donors, and sponsors. Thank you.

GTP

Full Member
10+ Year Member
Joined
Jul 25, 2010
Messages
700
Reaction score
59
hey all. I know this question has been asked multiple times. I've read what I could but some things don't apply to me. I've already signed a contract in ny as a hospital employee. Benefits aren't fantastic (no maternity leave or other shiny things I've heard usacs offers). I'm newly married and plan for no kids for at least two years. Location is far from the city so I don't have to worry about those crazy manhattan taxes. My concern is that I'm thinking of asking to change my contract to nocturnist to get at least $50 more per hour. I'm currently signed for $225 per hour. I'm just worried that if I also request to change to independent contractor, I will still be stuck with the same per hour amount. It seems easier to ask for $275 per hour and stay an employee than it is to jump to $300. I'm just curious if the tax break is really that big of a difference. I'd be bitter if I ended up with $275 to work nights as an independent contractor.

Members don't see this ad.
 
  • Like
Reactions: 1 user
275 * 1600 hours = 440k as a W2 employee. Not shabby at all. Remember the payroll taxes, healthcare, disability, etc that you will have to cover as a 1099.
 
275 * 1600 hours = 440k as a W2 employee. Not shabby at all. Remember the payroll taxes, healthcare, disability, etc that you will have to cover as a 1099.
Actually it's only 275 * 1440. Yeah not shabby I guess. But I won't be able to deduct the cost of my new iPad or whatever else people do with IC status. I only a month to decide because I start work in 4 months. And I feel like I can only get one or the other since I only have a short time to get my contract redone
 
Members don't see this ad :)
W2 is so much easier out of the box. Healthcare is a huge expense and payroll taxes/quarterly taxes suck.
 
Actually it's only 275 * 1440. Yeah not shabby I guess. But I won't be able to deduct the cost of my new iPad or whatever else people do with IC status. I only a month to decide because I start work in 4 months. And I feel like I can only get one or the other since I only have a short time to get my contract redone

$275/h nights 1099 with guaranteed 1440 hours??? I'd jump on that in a heartbeat. Am I missing something here.... I'm doing $235 in the middle of nowhere with brutal winters as 1099. It's still better than what what W2 jobs near my area is paying though. Otoh, I cannot deduct nearly enough things to cover for the extra tax burden of a 1099.

My understanding is that a 1099 job should be at least $15-20 higher than a comparable W2 job


Sent from my iPhone using Tapatalk
 
There is a third option: Per-diem employee. This is what I switched to. This allowed me to ask for a much higher hourly rate, and I no longer have to wonder how much of my bonus I'll get. Nor do I have to attend those pesky monthly meetings. I just come to work and get paid in cash. And I still get my malpractice paid by the hospital (which I don't think you get as an independent contractor).

If your benefits suck, then this is something to consider. However, you'd have to rely on your wife's health insurance, which is what I am currently doing.

But, it's probably better to be IC, if you're good with money, taxes, etc. I'm not, and I find it all too complicated for me, so I keep it stupid simple.
 
There is a third option: Per-diem employee. This is what I switched to. This allowed me to ask for a much higher hourly rate, and I no longer have to wonder how much of my bonus I'll get. Nor do I have to attend those pesky monthly meetings. I just come to work and get paid in cash. And I still get my malpractice paid by the hospital (which I don't think you get as an independent contractor).

If your benefits suck, then this is something to consider. However, you'd have to rely on your wife's health insurance, which is what I am currently doing.

But, it's probably better to be IC, if you're good with money, taxes, etc. I'm not, and I find it all too complicated for me, so I keep it stupid simple.
I am the wife. Lol. Why does everyone assume everybody is a dude? The benefits don't suck but they aren't good. They have health insurance which is basically about it. There is no extra 401 k contribution, no vacation, no maternity leave
 
Last edited:
  • Like
Reactions: 1 users
$275/h nights 1099 with guaranteed 1440 hours??? I'd jump on that in a heartbeat. Am I missing something here.... I'm doing $235 in the middle of nowhere with brutal winters as 1099. It's still better than what what W2 jobs near my area is paying though. Otoh, I cannot deduct nearly enough things to cover for the extra tax burden of a 1099.

My understanding is that a 1099 job should be at least $15-20 higher than a comparable W2 job


Sent from my iPhone using Tapatalk
The job has some locums though so it's got its issues
 
I am the wife. Lol. Why doesn't everyone assume everybody is a dude? The benefits don't suck but they aren't good. They have health insurance which is basically about it. There is no extra 401 k contribution, no vacation, no maternity leave

Sorry! Our field is heavily male dominated. My bad!
Anyways do you need the health insurance or can you rely on your husbands health insurance ?
 
  • Like
Reactions: 1 user
Sorry! Our field is heavily male dominated. My bad!
Anyways do you need the health insurance or can you rely on your husbands health insurance ?
Haha it's okay. My avatar probably doesn't help my argument. Well he will be a student so we need my health insurance. I was just looking at their package again this morning. The highest package is $600 per month for medical vision and dental for both of us. Can take $200 off that if we go for the most basic plan.
 
Haha it's okay. My avatar probably doesn't help my argument. Well he will be a student so we need my health insurance. I was just looking at their package again this morning. The highest package is $600 per month for medical vision and dental for both of us. Can take $200 off that if we go for the most basic plan.

So I would also look into health insurance through your husband’s school. These can often be very good and cheap, especially if it’s a good university.
 
  • Like
Reactions: 1 user
So I would also look into health insurance through your husband’s school. These can often be very good and cheap, especially if it’s a good university.
He might be going to an offshore school so this won't be helpful
 
  • Like
Reactions: 1 user
Actually it's only 275 * 1440. Yeah not shabby I guess. But I won't be able to deduct the cost of my new iPad or whatever else people do with IC status. I only a month to decide because I start work in 4 months. And I feel like I can only get one or the other since I only have a short time to get my contract redone

I'm going through all the 1099 (IC) tax stuff myself right now. My pretax compensation will be similar to yours.

My understanding is that deductions as an IC are too small to be worth the time aggressively pursuing for most EM docs. AFAICT, the big moneymakers with 1099 come if you start your own S-corp instead of calling yourself IC. Then you make more money in 3 big ways:

(1) As an S-corp, you can start your own 401(k) and cash balance plans (CBP) and so tax-defer ~$80--100K/y minimum (assuming you're in your 30s; can defer more to CBP as you get older). I will be deferring ~$100K/y and thus saving ~$20--30K in taxes that I would have otherwise paid as a W-2 with ~$18K 401(k) contribution limit. Of course, the downside is I can't access that extra $20--30K until I retire. But I personally am OK with that since I'm lazy and would prefer not to work anyway. And if I had access to that money immediately I'd probably just spend it anyway :)

(2) By thus reducing your taxable income by ~$100K/y through deferrals, if your husband has a low enough income you may now become eligible for the full 20% tax savings of the new TCJA credit. This could save you an extra $10--20K on taxes, which you *could* access immediately.

(3) Finally, you can also save $5--10K on Medicare taxes by being an S-corp.

And but now you need to pay your own full healthcare premium; for me who is single this will be ~$5K/y.

The downside to 1099, as others have said, is a lot of extra paperwork and time to learn how all this works. Alternatively, you could get a few professionals to help you; you'd probably pay them $10--20K/y total but still save money in net. I'm doing it ~all myself because I'm nerdy and enjoy outsmarting the government. (But I still need to pay an actuary ~1K/y to manage the CBP.)
 
Last edited:
  • Like
Reactions: 1 user
Members don't see this ad :)
I'm going through all the 1099 (IC) tax stuff myself right now. My pretax compensation will be similar to yours.

My understanding is that deductions as an IC are too small to be worth the time aggressively pursuing for most EM docs. AFAICT, the big moneymakers with 1099 come if you start your own S-corp instead of calling yourself IC. Then you make more money in 3 big ways:

(1) As an S-corp, you can start your own 401(k) and cash balance plans (CBP) and so tax-defer ~$80--100K/y minimum (assuming you're in your 30s; can defer more to CBP as you get older). I will be deferring ~$100K/y and thus saving ~$20--30K in taxes that I would have otherwise paid as a W-2 with ~$18K 401(k) contribution limit. Of course, the downside is I can't access that extra $20--30K until I retire. But I personally am OK with that since I'm lazy and would prefer not to work anyway. And if I had access to that money immediately I'd probably just spend it anyway :)

(2) By thus reducing your taxable income by ~$100K/y through deferrals, if your husband has a low enough income you may now become eligible for the full 20% tax savings of the new TCJA credit. This could save you an extra $10--20K on taxes, which you *could* access immediately.

(3) Finally, you can also save $5--10K on Medicare taxes by being an S-corp.

And but now you need to pay your own full healthcare premium; for me who is single this will be ~$5K/y.

The downside to 1099, as others have said, is a lot of extra paperwork and time to learn how all this works. Alternatively, you could get a few professionals to help you; you'd probably pay them $10--20K/y total but still save money in net. I'm doing it ~all myself because I'm nerdy and enjoy outsmarting the government. (But I still need to pay an actuary ~1K/y to manage the CBP.)
Thanks. All this sounds so
Intense and complicated. Will def be getting an accountant till I figure this out
 
  • Like
Reactions: 1 user
Thanks. All this sounds so
Intense and complicated. Will def be getting an accountant till I figure this out

Agree, it's like learning a new language. Probably best to find an accountant who specializes in doctors if you don't already have a good one. White Coat Investor's site lists a few.
 
Agree, it's like learning a new language. Probably best to find an accountant who specializes in doctors if you don't already have a good one. White Coat Investor's site lists a few.
I definitely need to read this book after the inservice exam. Thanks !
 
I have to say, working for a system that has both employees and entities both have there pluses and minuses.
Entities for this system are residents only, and they actually have better health insurance than employees. I know a few of the professor only (do not practice at the flagship) fall under this too.
Follows, physicians, and every other employee is under a different health insurance, 401b etc. Entities cannot get the 401b, they can get the 403a but I believe they only have one company to choose from (Fideltly vs. T. Rowe).
 
I have to say, working for a system that has both employees and entities both have there pluses and minuses.
Entities for this system are residents only, and they actually have better health insurance than employees. I know a few of the professor only (do not practice at the flagship) fall under this too.
Follows, physicians, and every other employee is under a different health insurance, 401b etc. Entities cannot get the 401b, they can get the 403a but I believe they only have one company to choose from (Fideltly vs. T. Rowe).
I believe you're confusing your terms. I think you mean 401a (not 403a) and you mean 403b (not 401b).
 
You can establish your own individual 401-k as a 1099 sole proprietor as well. No requirement to be an LLC or S-corp for this.
 
  • Like
Reactions: 1 user
hey all. I know this question has been asked multiple times. I've read what I could but some things don't apply to me. I've already signed a contract in ny as a hospital employee. Benefits aren't fantastic (no maternity leave or other shiny things I've heard usacs offers). I'm newly married and plan for no kids for at least two years. Location is far from the city so I don't have to worry about those crazy manhattan taxes. My concern is that I'm thinking of asking to change my contract to nocturnist to get at least $50 more per hour. I'm currently signed for $225 per hour. I'm just worried that if I also request to change to independent contractor, I will still be stuck with the same per hour amount. It seems easier to ask for $275 per hour and stay an employee than it is to jump to $300. I'm just curious if the tax break is really that big of a difference. I'd be bitter if I ended up with $275 to work nights as an independent contractor.


1. You aren't stuck with the same salary if you go to nights. You can always refuse if they don't come up to your number. Do they not have standardized, open salaries? If not, this is another red flag.

2. New York is so behind- no maternity leave? That's insane. I've never heard of an employed doc not getting leave. If this is important to you, I would discuss in depth. Insane. OTOH, working for USACS can be a disaster in many other ways.

3. I was not aware that independent contractors did not not medmal- can someone elaborate, please? Can someone also elaborate on the difference between per diem and IC? I did not realize there was such a difference.
 
3. I was not aware that independent contractors did not not medmal- can someone elaborate, please? Can someone also elaborate on the difference between per diem and IC? I did not realize there was such a difference.

Not sure about USACS, but depending on the job, ICs can certainly be eligible for paid malpractice insurance. My TH IC job provides it.

IC (synonymous with 1099) vs employee (synonymous with W-2) are tax terms referring to how you are paid. They are defined by the IRS. With W-2, whoever pays you also withholds your taxes, both FICA and ideally income taxes. With 1099, you need to withhold all your own taxes. That is the only distinction you can count on. Of course, at many places you are only eligible for benefits as a full-time W-2, although malpractice is often an exception that others are eligible for as well.

Per diems vs full-time refers to how much you are required to work. They are defined by your employer and so they mean different things at different shops. At my main shop, the full-timers are required to work 35h/w on average by contract; per diems are not. I am both full-time and IC at that place but at my side job I am per diems and W-2 (for that sweet, sweet 457(b) :).
 
Last edited:
  • Like
Reactions: 1 user
Thanks. That's what I thought. I've never had a per diem or IC position that didn't pay medmal. Was confused by PP. Thank you for your excellent response!
 
hey all. I know this question has been asked multiple times. I've read what I could but some things don't apply to me. I've already signed a contract in ny as a hospital employee. Benefits aren't fantastic (no maternity leave or other shiny things I've heard usacs offers). I'm newly married and plan for no kids for at least two years. Location is far from the city so I don't have to worry about those crazy manhattan taxes. My concern is that I'm thinking of asking to change my contract to nocturnist to get at least $50 more per hour. I'm currently signed for $225 per hour. I'm just worried that if I also request to change to independent contractor, I will still be stuck with the same per hour amount. It seems easier to ask for $275 per hour and stay an employee than it is to jump to $300. I'm just curious if the tax break is really that big of a difference. I'd be bitter if I ended up with $275 to work nights as an independent contractor.


Make sure you have a good understanding of payroll taxes on a 1099. It was a big shock to me when I was a moonlighting resident.
 
  • Like
Reactions: 1 user
1. You aren't stuck with the same salary if you go to nights. You can always refuse if they don't come up to your number. Do they not have standardized, open salaries? If not, this is another red flag.

2. New York is so behind- no maternity leave? That's insane. I've never heard of an employed doc not getting leave. If this is important to you, I would discuss in depth. Insane. OTOH, working for USACS can be a disaster in many other ways.

3. I was not aware that independent contractors did not not medmal- can someone elaborate, please? Can someone also elaborate on the difference between per diem and IC? I did not realize there was such a difference.
I don't think the mat leave thing is a New York thing. I think it should just the shop where I'm at. It's not really a big deal since I'm not planning on having a baby soon anyway. The salaries are hush hush.
 
Federal law protects salary discussions. It's imperative that we be more open- employees and docs will be better served by revealing salaries to each other. I don't see how we gain by not discussing pay. Why are they hush hush, and what happens if you discuss amongst yourselves? As a woman, you should be doubly concerned. This is a classic tactic to lowball women.
 
Federal law protects salary discussions. It's imperative that we be more open- employees and docs will be better served by revealing salaries to each other. I don't see how we gain by not discussing pay. Why are they hush hush, and what happens if you discuss amongst yourselves? As a woman, you should be doubly concerned. This is a classic tactic to lowball women.
I'm not too concerned. I took a few months to negotiate my contract and got almost everything I wanted. In speaking with classmates (because this is the best direct comparison), I'm definitely going to be in the top 1% of earners for my class. This is a better comparison than asking current employees who have had the job for 10 years. They should make more than me. Shouldn't they?
 
  • Like
Reactions: 1 user
I don't think so- it's not as though Medicare and private insurance are reimbursing their care at higher rates than yours. I earn a fixed rate as well, but this is the problem with being employed- we forget who is really paying, and how.
 
  • Like
Reactions: 1 user
They should make more than me. Shouldn't they?
No, they shouldn't. Why would they make more? Are they providing a different service than you are? If anything, a doc who has been working 25 years is probably moving slower than you are and is bringing in LESS money than you are, not more.
 
  • Like
Reactions: 1 users
No, they shouldn't. Why would they make more? Are they providing a different service than you are? If anything, a doc who has been working 25 years is probably moving slower than you are and is bringing in LESS money than you are, not more.

The fact that we have lost sight of WHO pays us and HOW and that instead we bow to the hospital/CMG is very concerning and a poor harbinger. In all honesty, we are terribly underpaid compared to what a hospital can bill. In a decent SDG that bills well, a doc should be able to pull $150/patient, with most employed/CMG docs far below this, showing how much gets skimmed off the top.

Medicare doesn't pay more for a doc with more experience. Wy should they make more and you less? We are killing ourselves with attitudes like this.
 
The fact that we have lost sight of WHO pays us and HOW and that instead we bow to the hospital/CMG is very concerning and a poor harbinger. In all honesty, we are terribly underpaid compared to what a hospital can bill. In a decent SDG that bills well, a doc should be able to pull $150/patient, with most employed/CMG docs far below this, showing how much gets skimmed off the top.

Medicare doesn't pay more for a doc with more experience. Wy should they make more and you less? We are killing ourselves with attitudes like this.
Hmm interesting. I just figured a seasoned doc is probably moving the meat more and has less lawsuits than a minted grad, and therefore deserved more money
 
Then the hospital would pay on productivity (I'm not saying this is ideal, and there are many ways for a doc to get screwed when an outside entity decides on what constitutes productivity) if they wanted to reward you for it. Unfortunately, we have lost a ton of autonomy in this situation and we don't seem to be working hard to get it back. People spend and spend and graduate from school in debt and then can't negotiate reasonably because of the financial situation.

I'm not sure where you are upstate. $225 isn't bad at all if it's a good job in other ways, but if you are moving the meat in a less desirable geographic area then you should be able to squeeze a bit more out of your gig. I earn about $200-$220 an hour in a VERY desirable part of the country (there is a waiting list for my job), but we see only 1.5 patients an hour (if that, knock on wood), have paid call, and have no PAs/NPs. We all get paid the same hourly rate for clinical work and get full benefits (including sick/maternity/paternity leave) and a small pension. I would leave in ten minutes at my salary if the job didn't have other amazing perks.

I don't see why people on the East Coast, and NY specifically, are wedded to salary secrecy, but I've actually had docs brag to me that their salaries are secret, which is insane. I've never heard a reasonable reason for secrecy from the worker's perspective. Your residency (although most residencies are totally clueless) should have explained all the ways to get paid and discussed open books with you and given you more robust job advice, but this rarely happens.

Doesn't sound like a bad gig, but my point above about who is actually paying you stands. There is no reason you should be paid more (or less) than anyone else unless you earn more (or less) for the hospital.
 
Last edited by a moderator:
  • Like
Reactions: 1 users
It seems most people agree that being an employee is better than being a contractor. WHat if I lived somewhere like NYC where 55% of my money will be going to taxes. Any utility in going IC And getting an accountant ?
 
If you are single and earning less than 157k, yes, and if you are married and earning around 314 k, yes, because you can set yourself up as an S corp or LLC and take 20% off your taxes off the top.

Benefits of 1099:
-In theory, they can't tell you when to work, or how much, because that would define you as an employee. The reality may differ.
-If you earn less than 314k married or 157k single, you can take 20% off your taxes by forming an S corp or LLC.
-Everything is tax deductible. Health insurance. CME. Boards. State license. Home office deduction. Scrubs. Stethoscope. Clogs. Sneakers. Internet. Cell plan. Cell phone. Travel for work. Travel for CME. Travel for boards. Review for boards. With the new tax law, none of this is deductible as a W2.
-You can open a solo 401k and save 54k a year, way more than an employee, cutting your taxes further and socking away a ton in a tax-advantaged retirement plan

Negatives of 1099
-Have to buy your own health insurance
-Less job security
-Have to pay self-employment tax
-Solo 401ks have less legal protection than employer 401ks.
-No 401k match
 
The new tax laws screw residents of NYC so completely that yes, it may well be worth it to go IC.
 
I'm married and will be earning 381,000
Might be worth it. Might not. Depends. Talk to an accountant. Depends on deductions, itemizing, state and property taxes how much your spouse earns. You really need an accountant to run the numbers specifically.
 
  • Like
Reactions: 1 user
Top