The IRS has announced its plans to audit 6,000 companies over the next 3 years to check compliance with employment tax in an effort to analyze the "tax gap" between what should be paid as taxes and what is actually received by the government. The 6,000 companies will be selected at random and focus on workers classification, fringe benefits, reimbursed expenses, officer compensation and non-filers. Companies selected should anticipate a line-by-line review of the company's employment tax returns and related documents, such as the employer's income tax returns and well as any information returns filed.
What does this mean for your practice?
Well, while the likelihood of your practice being selected in the initial 6,000 is not high, should this audit return monies to the IRS, which it likely will, then this initiative will surely be expanded. So, now is the time to make your New Years resolution to double check your practice tax compliance and look over your staff classification, for example whether the doctors working for you or whether you are truly an employee or independent contractor.
Identifying independent contractors v. employees
Whether a doctor is an independent contractor or an employee is a question of fact, not a determination to be made by the practice group. According to the IRS, an individual is an independent contractor if the person (or practice) for whom the services are performed has the right to control or direct only the result of the work and not the means and methods of accomplishing the result. In the context of a medical practice, the following factors will be considered (but other factors may also be considered): (i) whose patients are being treated, (ii) who owns the equipment being used, (iii) whether the practice exercises any control or discretion over the doctor or his work methods, (iv) whether the doctor is free to provide similar services to others, (v) who determines scheduling, (vi) how the doctor is compensated, and (vii) what, if any, benefits the doctor receives from the practice.
Bear in mind that a doctor working in a practice on a part-time employment basis may, in fact, be an independent contractor if the following factors are present: (i) the doctor brings his own equipment, (ii) the practice does not exercise any control or discretion over the part-time doctor or his work methods, (iii) the part-time doctor is free to provide similar services elsewhere, (iv) the part-time doctor is paid only for services rendered, (v) the part-time doctor does not receive any employee benefits from the practice, and (vi) the part-time doctor controls his own schedule.
