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1099 vs W2 audits and anti-kickback

Home Tax Reduction 1099 vs W2 audits and anti-kickback

  • Avatar sunnydoc 
    Participant
    Status: Physician
    Posts: 1
    Joined: 02/11/2017

    I have the opportunity to choose between a 1099 and W2. No benefits but everything else about the job seems to works like an employment (get on their insurance panels, use their EMR, billing goes through them, full time work 9-5 and M-F, regular set hours by company, guaranteed base salary, and production bonus, etc). I intentionally chose this group over many others for multiple reasons, knowing I would have to pay for health insurance, malpractice, and so on.

    Question is this: is it safe to do a 1099 in this arrangement? I already have an LLC and may consider an S-corp if required. I also have a side gig elsewhere getting a 1099 doing locums for the last couple years, and will get my own malpractice (I already have my own disability and life insurance), and may consider setting up my own solo 401k.

    My understanding is 2 issues MAY arise:

    1. anti-kick back statute – under 1099 independent contracts, you cannot give a % production of collections as it violates the law? But under W2 employment it allows for that because of the safe-harbor?

    2. IRS audits – possible concerns for tax audits and fines with 1099 if job looks more like an employment?

     

    Appreciate any advice and input!

     

    #36442 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8316
    Joined: 01/09/2016
    I have the opportunity to choose between a 1099 and W2.

    Click to expand…

    Highly irregular for you to get to choose. The group’s CPA should be working with them to determine if the work meets the qualifications for IC or employee status.

    2. IRS audits – possible concerns for tax audits and fines with 1099 if job looks more like an employment?

    Click to expand…

    The employer bears the huge responsibility of the likelihood of audit, which is very minimal. If they were to be audited, however, and were found to be in violation of the law, it would trickle down to you and could get quite messy, particularly with retirement plans.

    Johanna Fox Turner, CPA, CFP: I am not your financial advisor; any responses are for general purposes only
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #36444 Reply
    Avatar pulmdoc 
    Participant
    Status: Physician
    Posts: 434
    Joined: 09/19/2016

    The setup you describe (hours set by employer, guaranteed salary) sounds like you are an employee, not an independent contractor. Any “you can choose” offer by an employer would necessarily be for two different positions because FSLA defines employment based on the nature of the position, not what the employee asks to be called.

    #36466 Reply

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