Would Your Practice Survive An Employment Tax Audit? (1099 vs. W-2 part 2)

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!

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Practicing Outside The Box: Psychotherapy On The Client's Couch

Michigan therapist finds niche providing in-home psychotherapy services

Would you travel to a client's home to provide therapy? After witnessing the high no-show rates while working at community mental health centers Michigan, therapist Tomanika Witherspoon, LMSW, CEO of Growing Counseling Services, decided to do just that.

She created an "outside of the box" specialty practice by focusing on providing in-home therapy.

In Witherspoon's experience, individuals who discontinued traditional therapy cited transportation, time and family responsibilities as the biggest barriers for receiving treatment. By providing in-home therapy, Witherspoon saves her clients travel time, travel expenses and time spent in an office waiting room.

What about her own travel time and expenses? Witherspon said that she does not bill for her travel time. However, to minimize the unpaid travel time and expenses, she only sees clients within a 20-mile radius of her location.

What about safety issues? "I typically do a phone-screening to gather the client's demographic information, insurance info, and the assurance that we will have somewhere to meet privately," Witherspoon says. "Safety is generally not a concern, but if it ever becomes one, I would meet in a colleague's office."

Providing in-home therapy services is not for everyone, but Ms. Witherspoon makes it work for her and her clients.

Visit GrowingCounseling.com to find out more about Tomanika Witherspoon, LMSW's "outside the box" practice.

Have you found a creative niche, a unique office space, use non-traditional interventions, or have something that sets you apart from other private practice clinicians?  I want to hear about it! Email me with "outside the box" in the subject line.

(c) Can Stock Photo

Therapist Roll Call: Join Private Practice Toolbox Facebook Group

Call it group therapy for therapists. Connect with other like-mined therapists in my closed Facebook group and share resources, ideas, practice building tools, successes and failures. Must be a licensed mental health therapist or therapist in training be added to the group.

Click here and request to join the Private Practice Toolbox Facebook group

• If you're not familiar with Facebook groups, you'll have to join as your personal profile. Unfortunately, at this point you can't participate as your Facebook practice page.
• Your posts in the group will not show up in your other Facebook friend's newsfeeds, even though it may show up on your feed.
• As you get to know other therapists in the Facebook group it's OK to be selective in who you add as a "friend" to your personal profile. There's no pressure to add anyone in the group as a "friend" on your personal profile.
• My goal in creating the group is to have a fun and supportive forum to share ideas with each other in a more dynamic way than just through blog comments.
• I'll post articles from this Private Practice Toolbox blog in the Facebook group so we can discuss them. Feel free to post helpful practice building resources that you find with the group, too.

I'm looking forward to talking with you! So, what are you waiting for?

See you in the Private Practice Toolbox Facebook Group