If you are starting a group practice or running one already, something that you have to decide upon is whether to hire 1099 independent contractors or employees. Many clinicians start out by saying they will hire independent contractors, as you don’t have to pay towards unemployment taxes and social security and Medicare and there is a sense of freedom on everyone’s part. Many new business owners are afraid of being in charge of a group of clinicians, and rightfully so, as most of us don’t receive any business experience prior to starting our practices (one of the things I would change if I owned a graduate school in the social service field-to require business courses in case counselors or social workers decide to work in private practice).
The danger of choosing independent contractors solely on these criteria alone is that you may be missing out some important aspects of how you run your group practice that affect whether you actually should have employees or independent contractors.
The IRS defines independent contractors as “an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” Very vague. The IRS website has a page dedicated to the different between an independent contractor and employee-check it out here. The IRS also has a form you can read here with questions to ask yourself about whether you have employees or independent contractors. Some questions include: “Who is contacted when complaints arise?” “At what location does the IC perform their services?” “List the supplies, equiptment, material, or property that is supplied by the IC.” “Does the IC establish the level of payment, and who receives the payments?” “What type of advertisement does the IC and company do?” The questions go on. Many of these questions, when you look at them deeply seem impossible for the IC to do on their own without your group’s help. YOU are offering the location, YOU are likely supplying some things, like the couch, desk, paper and pens.
Additionally, if I have a group practice, I would like things to be run in some sort of way that I feel fits the feel of my business. I would like procedures to be done a certain way, and that the clinicians that I hire work in a way that reflects what I want my group practice to be seen as by the community. I market to the community by giving details on the clinicians that work in my group and what they do. You do not have that control with independent contractors. You cannot recommend continuing education, or ask them to come to a staff meeting, or help them grow as a clincian. Personally, as my group practice grew, I noticed I needed more structure for my business than when I hired my first clincian. As things get bigger, it gets harder to keep a business “everyone do it their way.”
I have seen many group practice owners change their independent contractors’ status to employee after learning that others have incurred large tax debt when the IRS backdated their independent contractors pay and required taxes to be paid on them. That hefty fine can tear a business down. Rather than taking what seems to be a safer approach in the beginning (with all other things to learn about when growing your group practice), take your time in asking yourself what kind of group practice do you want? And does that align with having independent contractors or employees.
As always, I recommend doing your research and contacting a private practice attorney who understands counselors in private practice (I’ve got a great one here in Chicago).
Maureen Werrbach is a psychotherapist, group practice owner and group practice coach. Learn more about her coaching services here: LEARN MORE HERE