Per Diem pay and taxes

[thanotoriousfob]

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Hi all,

I have a question regarding getting paid per diem and taxes. I was recently offered a part time job to get paid X amount per day. The doctor said he plans to pay me that X amount and not withhold taxes. This means he is paying me like an independent contractor. However, I will be working on his schedule (basically i have a set amount of days and any extra days he needs me to be there, we work it out ahead of time), use his equipment and attend staff meetings. To me it sounds like I would be an employee and not an independent contractor. My CPA also believes I would be an employee and not an IC.

I am having a problem and am concerned with the idea that he would not be taking any taxes out for SS (15.3%) because it's easier for him to pay me a nice even number and not have to deal with taxes. I am new to this, but my CPA says if he took it out, he would have to match half of the 15.3% or ~7.65% as he should if I am an employee. Is it normal for employers to not pay their share of the taxes and just offer a certain amount without adjusting for taxes? Any advice would be greatly appreciated. Thanks.

 

[310]

yeah, that's a common concern for employed optometrists. If it ends poorly with that employer, it might be grounds for a lawsuit.

 

[ABaverage]

unfortunately, unless you are a 40 hour per week doc, you will typically be taxed as an IC.

 

[Tippytoe]

Hi all,

I have a question regarding getting paid per diem and taxes. I was recently offered a part time job to get paid X amount per day. The doctor said he plans to pay me that X amount and not withhold taxes. This means he is paying me like an independent contractor. However, I will be working on his schedule (basically i have a set amount of days and any extra days he needs me to be there, we work it out ahead of time), use his equipment and attend staff meetings. To me it sounds like I would be an employee and not an independent contractor. My CPA also believes I would be an employee and not an IC.

I am having a problem and am concerned with the idea that he would not be taking any taxes out for SS (15.3%) because it's easier for him to pay me a nice even number and not have to deal with taxes. I am new to this, but my CPA says if he took it out, he would have to match half of the 15.3% or ~7.65% as he should if I am an employee. Is it normal for employers to not pay their share of the taxes and just offer a certain amount without adjusting for taxes? Any advice would be greatly appreciated. Thanks.

What the OD is offering you (to hire you as an IC) is 100% illegal. He is either ignorant or lazy (probably both). The IRS has spelled this out very clearly. If you are using his equipment and see patients in his office during regular office hours, you are an employee plain and simple. Doesn't mean many ODs don't pay people like this, but it's still wrong.

The employer OD will save himself some tax money but you will have to pay the difference. It's doubtful the IRS will care in the end. So if you are okay with it, go for it.

 

[thanotoriousfob]

Thank you all for the responses. I did a bit more research and found out that technically I cannot see patients unless I am credentialed and as of now I still am not. I could however see cash paying patients. He wanted me to come in and work under his license (I have my own obviously). I think he is a nice man but there is a good chance he is doing it because it is easy and convenient for him not to have to deal with taxes and save a few bucks.

But thank you for the input, I will put that into consideration when I talk to him.

 

[20DOC20]

Number of hrs worked per week has nothing to do with IC requirements.

IC means that you work for another doctor usually agreeing to his schedule and days. Professional etiquette states you adhere to his office policies of privacy and professional conduct.

Being IC means that they can't treat you the same as an employee.

That means you aren't required to attend staff meetings. I've worked a lot of IC and that's where I'd draw the line between employee and IC. You usually aren't paid for doctor meetings and they're usually held after clinic hours and go into the wee hours of the evening.

If they want you to attend staff meetings, then they have to employ you so that you don't pay self-employment tax.

And yes, if they were to lay you off under that arrangement, you could potentially sue them for unemployment even if they paid you as an IC because in court it would be on them to prove you're a true independent contractor. In my state, the court usually favors the plaintiff.

So, the law is on your side. If they want you to be their *itch, then they have to pay the extra % that would normally be paid by you as self-employment tax.

My experience in this profession is that if you let someone sc*ew you, they will. Don't let them. They'll respect you more for standing your ground and holding out for the maximum amount of money!

 

[Jibslider]

Yes, you basically would be getting hosed working as an IC in that situation. When I was a new grad and was doing the same thing (even though I should have been an employee), I was paying quarterly taxes and saving ~40% of my paycheck to pay taxes.

Also, as an IC, you will be forced to get a business license, and pay any additional taxes your state/county has for small businesses. In my example, I had to pay a tri-county tax as well.

The OD might be a nice guy, but he isn't going to want to pay you any more than he has to, it's business. Treating you like an IC is a good way for him to save money, or as he said it, "make things easier". I would push for employment.

 

[shu10str]

Is there any benefit, other than saving money, to the employer by hiring you on as an IC vs. employee?

What are the benefits to me to be an IC vs. employee? It seems like all the pros are on the employers side by hiring an IC. I guess I'd be open to moonlight elsewhere and supplement my income that way...

 

[Jibslider]

The benefit to the employer is not having to pay payroll taxes on you and not having to provide you ANY benefits. You don't get any federal/state employee protections as well.

There really are very little benefits to you being an IC. You might be able to wright off some expenses if you purchase any equipment, have a home office, etc.

If you plan to moonlight, make sure there is no non-compete clause. Be careful as there really is no benefit in being an IC in your current situation.