Private practice pay structure

[fittipaldi1of1]

How does the pay structure of a private practice usually work?
A job I recently interviewed at said it’s 1099, salary is 425 and stays there. They stated that is how the group is structured and there’s no real partnership, or any increase in salary or bonus in the future.

I assume this means they are just taking advantage of the new hires/non partners then right?

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[Justice4all]

Is that the base with quarterly production incentive?
No benefits and also have to come up with malpractice,health etc . No bueno

 

[fittipaldi1of1]

Apparently health insurance and malpractice is paid.. but no production bonus, profit sharing, anything

 

[deleted171991]

Apparently health insurance and malpractice is paid.. but no production bonus, profit sharing, anything

You will be an employee, what's so unclear/surprising? This ain't China. This is ice-cold crony capitalism. You are the body that works in OR X and creates a profit of Y for your overlords. If you die or quit, they'll get a new one.

If you don't like it, go start your own practice. Oh, wait, you can't.

Their 1099 is illegal (you're a de facto employee, not a contractor), but who cares, since the IRS can't do its job anyway. That also means that you have to budget for self-employment tax, congratulations!

 

[Status Sciaticus]

Is there a clause that says how many hours youll work per week since your not getting incentive or production bonus?

 

[AdmiralChz]

You will be an employee, what's so unclear/surprising? This ain't China. This is ice-cold crony capitalism. You are the body that works in OR X and creates a profit of Y for your overlords. If you die or quit, they'll get a new one.

If you don't like it, go start your own practice. Oh, wait, you can't.

Their 1099 is illegal (you're a de facto employee, not a contractor), but who cares, since the IRS can't do its job anyway. That also means that you have to budget for self-employment tax, congratulations!

You OK?

 

[Southpaw]

How does the pay structure of a private practice usually work?
A job I recently interviewed at said it’s 1099, salary is 425 and stays there. They stated that is how the group is structured and there’s no real partnership, or any increase in salary or bonus in the future.

I assume this means they are just taking advantage of the new hires/non partners then right?

you can only know if you're being taken advantage of if you have full understanding of how the physician partners are treating themselves. It's fair to assume however that you're their employee, will be treated as such, and they're making money off of you. Other question(s) in my mind are hours, vacation, weekends, location, why they aren't willing to make you a partner, case type, etc.

 

[Justice4all]

We need to expose these deceptive practices. This is not uncommon. A graduating resident was being convinced that 325k 1099 was better than 400k w2. Not to mention, the hours call burden was worse with the 1099 job.

 

[fittipaldi1of1]

Thanks everyone, I figured this was the case and wanted to confirm...

 

[Mman]

We need to expose these deceptive practices. This is not uncommon. A graduating resident was being convinced that 325k 1099 was better than 400k w2. Not to mention, the hours call burden was worse with the 1099 job.

the original post does not seem to be deceptive in any way. It seems to be a straightforward offer to hire somebody as an employee, although making it 1099 is basically illegal.

Also short of instituting mandatory employment education info in residencies, I do not know how you help whatever percentage of the resident population that is that illiterate when it comes to this. I mean if you are that dumb, that's kinda on you.

 

[IMGASMD]

We need to expose these deceptive practices. This is not uncommon. A graduating resident was being convinced that 325k 1099 was better than 400k w2. Not to mention, the hours call burden was worse with the 1099 job.

I hope you mean 400k 1099 is better than 325 w2.... or you’re just trying to drive the point home? Because I sure would take 400k w2 wouldn’t looking at the other option.

To op. In case you haven’t researched it yet, 1099 is usually for people have control their own schedule. Unless you can show up to OR whenever (days, length of time or scheduled time for yourself), you’re probably shouldn’t be paid with 1099. Then ask yourself this, if they’re trying to save some money by shifting some responsibilities to you but potentially that money is going to your pocket, is that okay with you?

They’re certainly skimming of your work, but is that better than an AMC? Is that better than some sweat equity partnerships that vote you out when you’re up for joining? Is that better than some places with three levels of partnerships? These are some of the questions that will have different answers from different people.

 

[aneftp]

You will be an employee, what's so unclear/surprising? This ain't China. This is ice-cold crony capitalism. You are the body that works in OR X and creates a profit of Y for your overlords. If you die or quit, they'll get a new one.

If you don't like it, go start your own practice. Oh, wait, you can't.

Their 1099 is illegal (you're a de facto employee, not a contractor), but who cares, since the IRS can't do its job anyway. That also means that you have to budget for self-employment tax, congratulations!

If you are single and young it often times better to be 1099. I’d rather be 1099 425k with 7 weeks paid off

vs envision/team health/Napa amc with crappy benefits 425k w2 (little or zero retirement match)

your total taxes paid (Self unemployment) plus w2 wages/Medicare taxes/fica you pay urself as a 1099 as a percentage of total 1099 is likely less than 15% of less.

I know as a 1099 making 450k I literally paid total taxes (everything) around 12-15% total taxes max as a percentage of my 450k. Aka. I was paying 55-65k to the feds each year. Massive tax write offs section 179, cme travel (travel cme) putting max into solo 401k

Once you get married the benefits of say an academic and especially state academic facilities. A 375k w2 academic state can have tons of benefits worth up to 50-60k.

For example health insurance gets very expensive once you have kids and a family. That alone is worth 15k-18k easily as an employee of a state academic facility. But envision health benefits are closer to 7-8k “benefit” My health insurance at my previous state academic facility was essentially “free”. Yes even my premium was waived I just paid taxes on my premium and no co pay if i said in the institution “network”.

 

[deleted171991]

You OK?

Are you? Translation: What's your problem?

I understand that a young grad can be naive, but to be surprised that your employer does not offer any form of profit sharing is beyond ridiculous. That's the essence of capitalism: NO profit sharing for employees.

 

[deleted171991]

If you are single and young it often times better to be 1099. I’d rather be 1099 425k with 7 weeks paid off

vs envision/team health/Napa amc with crappy benefits 425k w2 (little or zero retirement match)

your total taxes paid (Self unemployment) plus w2 wages/Medicare taxes/fica you pay urself as a 1099 as a percentage of total 1099 is likely less than 15% of less.

I know as a 1099 making 450k I literally paid total taxes (everything) around 12-15% total taxes max as a percentage of my 450k. Aka. I was paying 55-65k to the feds each year. Massive tax write offs section 179, cme travel (travel cme) putting max into solo 401k

Once you get married the benefits of say an academic and especially state academic facilities. A 375k w2 academic state can have tons of benefits worth up to 50-60k.

For example health insurance gets very expensive once you have kids and a family. That alone is worth 15k-18k easily as an employee of a state academic facility. But envision health benefits are closer to 7-8k “benefit” My health insurance at my previous state academic facility was essentially “free”. Yes even my premium was waived I just paid taxes on my premium and no co pay if i said in the institution “network”.

1099 is illegal in this situation. Read the IRS guidance. I would run away from any employer that uses these schemes. It points to bigger ethical issues.

 

[pjl]

Salary of 425 may be fine, even as 1099 (although 1099 may be the oddball part that may not be quite right). Depends on the details. There are a lot of jobs where that would be great pay for what you do. And some where that would be really unfair.

However, you need to understand you are an employee here, and not a partner.

Someone somewhere is taking the excess earnings each year (or risk in years like this one). Otherwise the salary would fluctuate.

 

[Arch Guillotti]

the original post does not seem to be deceptive in any way. It seems to be a straightforward offer to hire somebody as an employee, although making it 1099 is basically illegal.

Agree with this. The offer is not deceptive since it is clearly spelled out. However you can assume that someone is making money off of you and that you will never see the books.

 

[deleted171991]

I am not a big fan of physician employment (it's more about cronyism than capitalism), but I don't see any major difference between this offer and any usual employee-type relationship. This is EXACTLY what I would expect. One gets a salary, some benefits, end of story. One is a (no)body, a cog in the machine.

This is the future of anesthesiology and a lot of medicine in general. This is why we always tell students to forget anesthesiology and go into a specialty where they could always start their own business. The kind of post that usually generates insults about doom and gloom etc.

Now the chickens have come home to roost.

 

[Status Sciaticus]

We need to expose these deceptive practices. This is not uncommon. A graduating resident was being convinced that 325k 1099 was better than 400k w2. Not to mention, the hours call burden was worse with the 1099 job.

Why dont you lead the way? Please tell us about this practice that was trying to screw over your graduating resident?

 

[anbuitachi]

If you are single and young it often times better to be 1099. I’d rather be 1099 425k with 7 weeks paid off

vs envision/team health/Napa amc with crappy benefits 425k w2 (little or zero retirement match)

your total taxes paid (Self unemployment) plus w2 wages/Medicare taxes/fica you pay urself as a 1099 as a percentage of total 1099 is likely less than 15% of less.

I know as a 1099 making 450k I literally paid total taxes (everything) around 12-15% total taxes max as a percentage of my 450k. Aka. I was paying 55-65k to the feds each year. Massive tax write offs section 179, cme travel (travel cme) putting max into solo 401k

Once you get married the benefits of say an academic and especially state academic facilities. A 375k w2 academic state can have tons of benefits worth up to 50-60k.

For example health insurance gets very expensive once you have kids and a family. That alone is worth 15k-18k easily as an employee of a state academic facility. But envision health benefits are closer to 7-8k “benefit” My health insurance at my previous state academic facility was essentially “free”. Yes even my premium was waived I just paid taxes on my premium and no co pay if i said in the institution “network”.

yea but i think unless your wife/husband makes more, it makes more sense for them to be W2, put you on their insurance , while you be 1099!

 

[deleted171991]

It doesn't matter what one "prefers", if it's illegal.

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

 

[Justice4all]

This was a group in San Antonio.

 

[deleted941485]

This was a group in San Antonio.

Texas is so dead now. Job wise.

 

[dannyboy1]

What are the hours/calls required? Without that you can’t really evaluate the job. As for the 1099 or w2 thing it depends. Can be a benefit if you can get a lot of tax write offs and have a spouse with good health insurance. If the IRS has a problem with it that would be on the practice, not you. They are the one issuing the 1099.....

 

[aneftp]

California due to the Uber fiasco with 1099. One of the consequences is crnas have a very hard time getting 1099 “full time” jobs. All w2 now for cRna out there Unless they are truly per diem true 1099

but can’t be these fake 1099 full time any more with cRna in California

 

[Mman]

What are the hours/calls required? Without that you can’t really evaluate the job. As for the 1099 or w2 thing it depends. Can be a benefit if you can get a lot of tax write offs and have a spouse with good health insurance. If the IRS has a problem with it that would be on the practice, not you. They are the one issuing the 1099.....

if the IRS has a problem with the company paying you money, they might not be paying you money for much longer

 

[dannyboy1]

if the IRS has a problem with the company paying you money, they might not be paying you money for much longer

they just reclassify it as W2 if they come across it. It’s not that big a deal.

 

[deleted171991]

they just reclassify it as W2 if they come across it. It’s not that big a deal.

Retroactively.

The worst of both worlds: low salary AND W-2.

 

[AdmiralChz]

Retroactively.

The worst of both worlds: low salary AND W-2.

I get all my benefits pre-tax and split everything equally with my partners - with the exception of call pay where the more you work the more you make. 1099 gigs (at least reputable ones) don’t really exist near me.

I never understood all the W2 haters. I am sure There are bad W2 jobs around but that’s a fact of life - there are just bad jobs out there in every career. Not limited to W2, 1099, K1, cash, whatever. Just a different way of organizing your group. My group is fair and democratic, and hardly a unicorn.

 

[deleted171991]

I get all my benefits pre-tax and split everything equally with my partners - with the exception of call pay where the more you work the more you make. 1099 gigs (at least reputable ones) don’t really exist near me.

I never understood all the W2 haters. I am sure There are bad W2 jobs around but that’s a fact of life - there are just bad jobs out there in every career. Not limited to W2, 1099, K1, cash, whatever. Just a different way of organizing your group. My group is fair and democratic, and hardly a unicorn.

I don't "hate" W-2. It's the friggin' law that employees are W-2. It's not a choice (unlike what some people think). One is either an employee or a contractor, based on clear criteria; can't be both. Being paid by 1099 as a de facto employee should be a huge red flag. It's also a sign that one's employer may be trying to shield itself from malpractice liability, meaning that they will pressure one to do all the wrong things in your daily work, if it benefits them. And that one can be summarily fired anytime, at will.

A W-2 just doesn't allow the same deductions being a 1099 contractor does.

 

[Zekchar]

I am not a big fan of physician employment (it's more about cronyism than capitalism), but I don't see any major difference between this offer and any usual employee-type relationship. This is EXACTLY what I would expect. One gets a salary, some benefits, end of story. One is a (no)body, a cog in the machine.

This is the future of anesthesiology and a lot of medicine in general. This is why we always tell students to forget anesthesiology and go into a specialty where they could always start their own business. The kind of post that usually generates insults about doom and gloom etc.

Now the chickens have come home to roost.

I didn't think this before, but this current experience has opened my eyes to just this. Well stated/

 

[Zekchar]

California due to the Uber fiasco with 1099. One of the consequences is crnas have a very hard time getting 1099 “full time” jobs. All w2 now for cRna out there Unless they are truly per diem true 1099

but can’t be these fake 1099 full time any more with cRna in California

Can you expand on how this has changed things?

 

[deleted162650]

A W-2 just doesn't allow the same deductions being a 1099 contractor does.

It does if your group is structured correctly and has a competent CPA.

 

[Mman]

they just reclassify it as W2 if they come across it. It’s not that big a deal.

the paying of penalties going back retroactively would decimate their cash flow

 

[deleted171991]

It does if your group is structured correctly and has a competent CPA.

At a business level, yes. The business can deduct at least as much as a 1099 contractor. Just not the individual W-2 employee himself, when doing his own taxes.

E.g. the business can cover CME expenses.

 

[Arch Guillotti]

At a business level, yes. The business can deduct at least as much as a 1099 contractor. Just not the individual W-2 employee himself, when doing his own taxes.

E.g. the business can cover CME expenses.

???

I take deductions on my W2 and at the corporate level.

 

[deleted171991]

???

I take deductions on my W2 and at the corporate level.

There are very few work-related deductions on a W-2. Especially since the new tax law in 2017 (a lot of work-related deductions were eliminated).

Taxes and Work Expenses for W-2 Employees

At one time, nonreimbursed job expenses for W-2 income employees were deductible on tax returns. However, effective in 2018, new tax law no longer allows these deductions. Rather than curtail business networking opportunities, companies may need to adjust their employee expense allowances.

smallbusiness.chron.com

"Can I Deduct Unreimbursed Employee Expenses?"

Find out if you can claim unreimbursed employee business expenses with the help of H&R Block. Learn about the TCJA changes to business expenses deductions.

www.hrblock.com

 

[Arch Guillotti]

There are very few work-related deductions on a W-2. Especially since the new tax law in 2017 (a lot of work-related deductions were eliminated).

Taxes and Work Expenses for W-2 Employees

At one time, nonreimbursed job expenses for W-2 income employees were deductible on tax returns. However, effective in 2018, new tax law no longer allows these deductions. Rather than curtail business networking opportunities, companies may need to adjust their employee expense allowances.

smallbusiness.chron.com

"Can I Deduct Unreimbursed Employee Expenses?"

Find out if you can claim unreimbursed employee business expenses with the help of H&R Block. Learn about the TCJA changes to business expenses deductions.

www.hrblock.com

What's your point then?

I deduct everything possible, just like a 1099 would.

 

[deleted171991]

What's your point then?

I deduct everything possible, just like a 1099 would.

I am no expert, but the 1099 still offers some deductions that the W-2 doesn't. Plus a lot of expenses on the W-2 are subject to the 2% AGI threshold.

16 Tax Deductions and Benefits for the Self-Employed

Running your own business poses risk. Knowing where you can save money is crucial, and there are a number of tax breaks that can help you do just that.

www.investopedia.com

With W-2, now:

You can deduct unreimbursed employee expenses only if you qualify as an Armed Forces reservist, qualified performing artist, fee-basis state or local government official, and employee with impairment-related work expenses.

If you don't believe me, check your latest tax return to see how few deductions you'll find there.

 

[deleted162650]

@FFP

When W-2 in a properly structured group, you submit all expenses to the group. These are then payed to you as reimbursements. Then taxes are deducted from the remaining money in the pot.

This keeps all business related expenses off your personal return so it is very clean and less audit prone.

Expenses I get pre-tax: cell phone, car lease or depreciation, business mileage, home office, 1/2 of home internet, any work related electronics or equipment, business % of auto insurance, and that’s not even all of it.

I have posted on this before. 1099 offers almost no benefit unless you have side businesses in addition to your anesthesia gig.

 

[Status Sciaticus]

@FFP

When W-2 in a properly structured group, you submit all expenses to the group. These are then payed to you as reimbursements. Then taxes are deducted from the remaining money in the pot.

This keeps all business related expenses off your personal return so it is very clean and less audit prone.

Expenses I get pre-tax: cell phone, car lease or depreciation, business mileage, home office, 1/2 of home internet, any work related electronics or equipment, business % of auto insurance, and that’s not even all of it.

I have posted on this before. 1099 offers almost no benefit unless you have side businesses in addition to your anesthesia gig.

What about SEP-IRA contributions? Employee 401ks dont match at that level and dont max out at 52.5K.

 

[ucladoc2b]

What about SEP-IRA contributions? Employee 401ks dont match at that level and dont max out at 52.5K.

A partnership can institute profit sharing contributions to a 401K at that 57k level

 

[aneftp]

@FFP

When W-2 in a properly structured group, you submit all expenses to the group. These are then payed to you as reimbursements. Then taxes are deducted from the remaining money in the pot.

This keeps all business related expenses off your personal return so it is very clean and less audit prone.

Expenses I get pre-tax: cell phone, car lease or depreciation, business mileage, home office, 1/2 of home internet, any work related electronics or equipment, business % of auto insurance, and that’s not even all of it.

I have posted on this before. 1099 offers almost no benefit unless you have side businesses in addition to your anesthesia gig.

What? A pure 1099 offers a ton of benefits. I have been a pure 1099

And I have been part of w2 private group with bonus along with pretax slush fund ($40-50k) to pay out tax deductible expenses (cme, grips, hotel , cars) (retirement max out at 52-55k whatever the rate was )

my tax write off as pure 1099 was greater cause I got to put my spouse on my own payroll and put another 20k plus in to solo 401k plus the 55k plus I put in for myself.

 

[deleted162650]

What about SEP-IRA contributions? Employee 401ks dont match at that level and dont max out at 52.5K.

Our 401k maxes at 57k this year. Keep in mind that employee contributions and employer contributions (match) is all the same thing/same money when you are the business owner. In addition, we have a DBP which allows for a nearly unlimited amount of pretax money to be socked away (its not actually limitless, but it’s more than anyone would actually ever contribute).

 

[deleted162650]

my tax write off as pure 1099 was greater cause I got to put my spouse on my own payroll and put another 20k plus in to solo 401k plus the 55k plus I put in for myself.

I’d say claiming your wife as your employee is shady at best (not to mention incredibly sexist )

 

[sethco]

Our 401k maxes at 57k this year. Keep in mind that employee contributions and employer contributions (match) is all the same thing/same money when you are the business owner. In addition, we have a DBP which allows for a nearly unlimited amount of pretax money to be socked away (its not actually limitless, but it’s more than anyone would actually ever contribute).

I always wondered about this. Let's say you get a side gig doing some consultant work and you make 100k doing this. Let's say you want to put as much as possible into an Individual 401k. Since you already put in your "employee" contribution to your group 401k, you would be limited to only an employer contribution into your side gig (20k, right?). Unless you are able to claim that all of your group 401k contribution is employer only? If that would be the case, then you could contribute 39k into the Solo 401k (employer plus employee contribution). Am I thinking of this incorrectly?

 

[sethco]

I’d say claiming your wife as your employee is shady at best (not to mention incredibly sexist )

Depends on what you are having them do to "earn" that

 

[Status Sciaticus]

A partnership can institute profit sharing contributions to a 401K at that 57k level

Are partners using the W-2 or the K-1?

Our 401k maxes at 57k this year. Keep in mind that employee contributions and employer contributions (match) is all the same thing/same money when you are the business owner. In addition, we have a DBP which allows for a nearly unlimited amount of pretax money to be socked away (its not actually limitless, but it’s more than anyone would actually ever contribute).

I didnt know about DBPs! Isnt it for self-employed individuals and not employees?

 

[deleted162650]

I didnt know about DBPs! Isnt it for self-employed individuals and not employees?

We get paid W2, but we are all shareholders in the corporation.

 

[Arch Guillotti]

We get paid W2, but we are all shareholders in the corporation.

Same here. Expense retirement plan.

 

[Splenda88]

We need to expose these deceptive practices. This is not uncommon. A graduating resident was being convinced that 325k 1099 was better than 400k w2. Not to mention, the hours call burden was worse with the 1099 job.

Why would someone with an above average IQ believe that?