There are literally hundreds of physician practice groups nationwide, looking to sign up Emergency Physicians, Radiologists and Anesthesiologists who have either recently completed Residency, or those who have been practicing for years. What many of you may not be aware of is that you should really weigh the offers you receive based on being an employee, or whether or not you should contract as an Independent Contractor Physician. Failure to do this could wind up costing you thousands in additional taxes, and also a reduction in the amount of retirement money you can put away. While being an Independent Contractor may not sound like the best option, read on to see why you should give it strong consideration.
As a physician, you have expenses related to the way you practice. These expenses could include your telephone, auto related travel, and perhaps even some overnight travel depending on where you practice. These are in addition to your regular continuing education costs. As an Independent Contractor, you would be able to pay these expenses pre-tax, rather than after tax. Based on the typical physician ́s salary, that would save you in excess of 35% for all of these expenses. The tax savings will really add up over time.
Health Insurance Options
As a health care provider, you understand health insurance costs better than most, so why should you only have the choice of the carrier offered by the physician practice group? The other side of that question is that if you want to purchase coverage from another provider, you have to pay for it with after tax income. Why not purchase the type of coverage you want, and pay for it with pre-tax dollars, rather than take someone else ́s choice?
Physician Retirement Plans
As an employee, the IRS limits the amount you are allowed to contribute to a 401(k) plan to $49,000, and in most cases, if the practice group has an option at all, it typically contains mutual funds you don ́t want to own. As an Independent Contractor, you can establish a physician pension for yourself, and contribute over $100,000 per year, and you also get to decide where to invest those funds. Increased
As an Independent Contractor, the practice group will not be responsible for matching your Social Security and Medicare taxes every pay period, resulting in a greater hourly rate for you, which can then be used to fund “business” expenses and your Physician Retirement Plans.
Simplified Income Verification
While income verification may not sound like something important, try applying for a home mortgage when you are being paid by multiple physician practice groups or hospitals. Other than your tax return, there is no way to verify your income, and technically, you would have no real employment history. This happened to a client who has been a Radiologist for 20 years, and works for 5 different hospitals. We were able to consolidate his income via a Physician Corporation, and set him up on a payroll system. He will never have to worry about employment verification again.
Taking the easy way out and becoming an employee may sound like the best route to take when joining a physician practice group, going the extra mile and weighing all of your options may not only create tax savings, but it may result in you making and keeping more in the long run. After all, it is not about how much money you make- it is about how much you actually get to keep. We can help you keep more. Call Us.
My Professional CFO, LLC, is a Business Management firm providing the highest level of service in three key areas of importance to Independent Contractor Physicians, Small Business Owners and Entrepreneurs.
We specialize in Corporation filings and ongoing Compliance, Accounting and Payroll, and Investment Management. Our professionals will assist you in forming the appropriate type of company for your situation and work with you to make sure your company remains compliant. We provide ongoing Accounting and Payroll services to make certain all bills are paid and necessary tax forms and withholding payments are made in a timely manner, as well as the set up and management of your retirement accounts.
We are not simply a document filing service; we are here to help you with the part of the business that you have to do, so you can focus on what you love to do.
Alan Conner, MBA – President of My Professional CFO, LLC has nearly 2 decades of experience working with professionals and small business during both the start-up and ongoing management. He has written countless business plans and has managed assets for both institutions and high net worth clients.
Email us with any questions or call us at: 1-800-517-0CFO (1-800-517-0236)