Worker Classification of Health Care Professionals

The IRS has been auditing healthcare companies to make sure they are properly classifying their workers as either independent contractors or employees. If workers are classified as employees, the company has to withhold taxes from their pay and pay additional taxes. Misclassifying workers can result in big financial consequences and the company may also have to pay interest and penalties. It may also affect the company’s compliance with other laws, like minimum wage and workers’ compensation. This article talks about how the IRS is losing money because some workers are being classified as independent contractors instead of employees. The IRS is trying to fix this problem by training its staff better and offering a program to settle disputes about worker classification. Congress has also tried to pass laws to make things clearer, but they haven’t been successful. In the health care industry, it’s important to correctly classify workers as either employees or independent contractors for tax purposes. This is determined by looking at the degree of control the employer has over the worker. The IRS uses a set of 20 common law factors to help make this determination, but it can still be subjective. The IRS looks at all relevant information to see how much control the business has over the worker. This is important because misclassifying workers can lead to tax issues for the health care entity. Determining if a physician is an employee or an independent contractor can be complex. The common law test suggests that physicians should be classified as independent contractors because they make independent decisions in patient care. However, courts and the Service sometimes focus on other factors. The Service has identified factors such as payment methods, work schedule, compliance with company policies, and fringe benefits as relevant in determining a physician’s classification. These factors are important in determining whether a physician is an employee or an independent contractor. Employee status means the doctor works only at one healthcare facility and can’t have their own private practice. Independent contractor status means the doctor works for more than one facility and can see patients outside of the hospital. This can depend on where the doctor needs to work, like if they’re a trauma doctor who’s only needed at one hospital. When a health care entity hires a doctor through a professional service association, the doctor is considered an employee of the association, not the health care entity. This is only the case if the association has the right to control the doctor’s activities and there is a contract recognizing this control.

Whether a doctor is an employee or an independent contractor can also be determined by how they are paid. If they are paid a fixed wage, they are likely an employee. If they are paid for each service they provide, they are likely an independent contractor.

The hours a doctor works can also indicate their work status. If they have a set schedule that they follow closely, they are likely an employee. But some specialties may require specific schedules, so this factor isn’t always definitive.

In simple terms, how a doctor is hired, paid, and their work hours can determine if they are an employee or an independent contractor of a health care entity. If a physician at a health care company has to follow the company’s rules and practices, they might be considered an employee. The same goes if they get benefits like vacation or insurance. A law called Section 530 can help companies avoid paying taxes for misclassifying workers, but it has some specific rules. This law applies to periods after December 31, 1996. Section 530 applies if the employer has filed all required tax and information returns for the worker, treated similar workers the same, and has a reasonable basis for treating the worker as an independent contractor. The employer can rely on judicial precedent, IRS audits, or industry practices as a reasonable basis. The Classification Settlement Program helps employers figure out if they can treat their workers as independent contractors or if they need to classify them as employees. If the employer meets certain requirements, they may get a reduced tax assessment. But if they’re not sure if they qualify, they shouldn’t feel pressured to reclassify their workers. Many cases have been resolved in favor of employers at the appeals level. When a health care company hires a professional, they need to have a written agreement that clearly states if the professional is an employee or independent contractor. This helps avoid confusion and shows the company’s intention. To make sure a professional is considered an independent contractor, the company should give them control over their work, let them set their own hours and fees, and not treat them like regular employees. They should also not provide benefits, and let the professional advertise their own services. This helps avoid any issues with the IRS and employment taxes. The text discusses the tax laws and regulations related to independent contractors in the healthcare industry. It includes references to specific sections of the Internal Revenue Code and court cases. It also mentions various factors that determine if a worker is an independent contractor or an employee. The text also includes information about recent legislation and legal rulings related to this topic. Overall, it provides a detailed overview of the complex tax requirements for independent contractors in the healthcare industry.

Source: https://www.floridabar.org/the-florida-bar-journal/worker-classification-of-health-care-professionals/