Does the state tax commission really take the time to audit small private practices? I didn't think so, until my practice was selected for an audit.
A few years ago my clinic was selected for an employment tax audit. Lucky me, right? When the auditor walked into my office suite and saw many offices with different names on the doors, he looked at me pleadingly and said, "Please, please don't tell me that these therapists are all classified as 1099 contractors."
I replied, "I won't. We're all W-2's."
There was a look of relief on his face.He then proceeded to tell me that health and mental health private practitioners are notorious for incorrectly classifying 1099 employees. In his experience many groups are set up as contract workers when they are acting like employees (I'll go over into detail about the the IRS criteria for how to classify an employee as a 1099 vs. W2 employees in a forthcoming post).
The auditor requested access to all of my financial documents including bank accounts, accounting, payroll information and tax documents. He asked us questions about any large checks written directly to employees to make sure we were paying our employment taxes. After a brief review of my payroll and tax documents the auditor thanked me for making his job easier and left with a smile. I breathed a huge sigh of relief.
Had I hired the therapists working with me as 1099 I may have been penalized with a hefty fine and required to pay back employment taxes on all of the therapists' income. I was not in a position to shell out thousands and thousands of dollars. Had I been incorrectly classifying employees it may have put my practice in jeopardy.
Do you know the IRS criteria for classifying 1099 contract workers vs. W-2 employees? It isn't based on whether or not you want to pay your therapist's taxes or want to have them pay self-employment taxes. It isn't based on whether they are full-time or part-time workers. It isn't based on whether or not you provide benefits.
There are many misconceptions about classifying employees in private practice. I'll address theses criteria for how to distinguish between hiring 1099 vs. W-2 therapists in upcoming posts.
Watch for the next Therapist Blog Challenge coming next week, too!
Ask me about my private practice and I light up. I love it. I just spent the last day and a half furnishing and decorating an 
I am passionate about maintaining a private practice as it grants me the ability to participate in the way that best suits me. I am an active parent to four elementary school aged children and I am able to schedule clients in a way that permits me to be present for my children. As they grow older and more independent, I am able to increase the amount of hours I can see clients in my private practice. I am not beholden to a specific way of working with each client, but rather, I'm able to respond to the needs of each individual, couple or family.
Private practice allows me to refine my specialty in working with marriages impacted by sexual betrayal. When I was working in an agency setting, I was required to see whatever cases walked through the door. So, in any given day I could end up working with children, teens, couples, elderly, and families. Even though I certainly enjoy the variety that comes from working in an agency setting, there is something deeply gratifying knowing that I'm developing a skill set that comes from working with the same types of cases day after day. I love knowing for certain that I can make a difference in the lives of the clients sitting across from me in my office.
In the last 3 years I have gotten married, and had 2 children. Private practice has allowed me to adapt to my changing lifestyle. It worked great when I was single and could work evenings/weekends, etc. and it works great now when I need to be home evenings and weekends to be with my family. Private practice affords me the opportunity to build a company that makes a difference in the lives of our clients, and provide a healthy work environment for my associates and interns.
I have experienced the joy of connecting with people in the most emotionally intimate ways. I *know *them deeply and meaningfully. And although I've always maintained professional boundaries, I find that they know me, too. And so I grieve the loss of these relationships even while knowing that I am responsible for my own happiness. And as I retire I will find new ways to find pleasure in my life, but I also look back with a sense of satisfaction about having chosen such a meaningful profession.
As healers, we genuinely like to do our work. Guiding clients through the therapy process and seeing them make progress is why we do what we do. But if you're in private practice, you know there's a lot going on in the back end and that it's crucial to run an efficient and organized business.