If you are not sure if you are an independent contractor or not, don’t worry, you are not alone. Employment laws are not always clear, and as I examine both the IRS 20-point checklist as well as the ABC rules which should simplify things, you’ll see that for Nurse Practitioners, it’s full of grayness.
Let’s dive in and see if we can untangle the complex web of guidelines and legalities. For more details, I strongly suggest you listen to the podcast as the notes below are the cliff notes. Keep in mind, that I am not an employment law attorney. I’m not an attorney of any kind.
First Stop: The IRS 20-Point Checklist
Before anything else, let’s chat about the IRS 20-point checklist. The IRS uses it to determine if someone is an employee or an independent contractor. In essence, if you can pick your work hours, provide your tools, or work for multiple clinics, chances are you’re in the contractor camp. But here’s the twist: not adhering to this checklist can land clinics in hot water. Mistakenly classifying an employee as an independent contractor can mean hefty penalties.
Enter the ABC Test
Moving on, there’s another metric known as the ABC test. Let’s break it down:
- A is about autonomy. If you’re free from oversight in your work from the payer (not talking about your collaborator here), you tick this box.
- B dives into the nature of your work. If you’re a healthcare worker in a healthcare clinic, there’s some overlap, which can get tricky.
- C? It’s about consistency. If you’re a regular plumber for a clinic, you align with this.
To make things even more gray, your state may follow A+B+C or A+B or A+C or even something different. States like Alaska, Arkansas, California, and many others follow this ABC guideline.
But it’s not universal. Some states have their twists, or they pivot to the IRS Common Law Rule, focusing on behavioral, financial, and relational controls between a worker and employer.
Here’s the issue:
Misclassifying a worker can mean steep fines, back taxes, and more headaches than you’d care for. And for independent contractors, especially in healthcare, the waters can get murky. Many practitioners, surprisingly, aren’t even aware of these guidelines (and have been fined!). That’s right, it’s like navigating a maze without a map!
My Suggestions/Advice
If you’re venturing into the world of independent contracting or hiring one, here are some pearls of wisdom:
- Consult an Attorney: If in doubt, consult an employment attorney. A bit of investment now might save you a heap in the long run.
- Business Structure Matters: If you’re in healthcare, steer clear of working as a sole proprietor. It’s just too risky.
- Tax Talks: Sit down with a CPA about your tax filing status. Personal tip: an S-Corp could save you tons in taxes.
- Stay Updated: Rules vary, and they change. Keep yourself informed and even educate your workspace colleagues.
- Keep an Eye on Expenses: Track everything, because as a contractor, every penny counts for tax benefits.
- Contracts are King: Never, and I mean never, step into an independent contract without a written agreement.
Finally…
Do your due diligence and monitor what is going on in your state. Stay informed of what is going on in your state legislation, employment law, and on a national basis. And please, do not forget to work with a CPA.
Here’s the Podcast
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Hi! This podcast was very helpful. I’ve been a 1099 since I became an NP but absolutely fell into w2 for my first job. This second one is way more grey area. However, I am so very confused about insurance. As a 1099 do I need to get my own LLC and then credential my own insurance and not under the group? As I’m trying to look at these contracts it’s so confusing. The other confusing piece is that so many insurances require like 24/7 care, sick visits, all those things but my intention is to stay part time. Any resources or recommendations on thia?
Some of this will really depend on how you have set up your contract. Who is billing and how have you arranged to be paid. In terms of the NPI-2, take a look at podcast #80, which is all about the NPI1 and NPI2.
If you are actually doing your own practice (and not contracting your services to another company), you will be the one to provide coverage. It’s not difficult and there are certainly ways in which to keep yourself part-time.
Any advice if you are leaving a practice to start your own ? Don’t want to get in trouble in case they hold up non compete I signed in 2015
If you are bound by a non-compete clause, and if they are legal in your state, you’ll need to follow it. Your best bet however, would be to consult an attorney who can advise you in this. Some NC’s are found to be null because of the undue hardship they pose to the employee.