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Healthcare Professionals

Tax Resolution: Service

As a healthcare professional you have gone through extensive education and specialized training to learn how to take care of your patients and their conditions.  The last thing you want to do is spend extra time researching the ever-changing and confusing tax laws or preparing financial statements.  At T&V we understand your industry and can provide you with the information you need to make decisions and get back to your practice and patients.

Doctor Checking a Form

Entity Selection

Before you start a practice, there are a number of preliminary decisions to be made. One of the first choices you will face is the legal form in which you will operate the business. Should it be an unincorporated sole proprietorship, a partnership, a limited liability company, a regular corporation, or an S corporation? Each of these forms has both tax and non-tax advantages and disadvantages that must be weighed in conjunction with your own plans and personal situation.

Sole proprietorships, for example, are the easiest and cheapest business form to set up, and they can be operated with few formalities. However, they offer no personal liability protection and don't allow you to get many of the tax benefits that are available to corporate employees.

Partnerships offer many of the same advantages and disadvantages as the sole proprietorship, but they allow the business to be owned and run by more than one person. Also, the liability problem can be overcome to a certain extent by forming a limited partnership. Under traditional tax rules, partners whose liability is limited cannot be involved in actively managing the business; however, the IRS is reconsidering these rules. Losses from these partnerships may be restricted by the so-called passive activity rules.

Compensation and Retirement Planning

S corporations are one of the most popular choices of business entity. As a shareholder-employee of an S corporation, I am writing to remind you of some important rules governing compensation, health and accident insurance, and Schedule K-1 issues. The IRS recently highlighted these key issues on its web site.

 

When S corporation shareholders perform more than minor services for the corporation, and receive or are entitled to receive compensation in exchange, they are employees for federal employment tax purposes. Their compensation must be reported as wages for those purposes. Additionally, compensation to a shareholder-employee must be reasonable.

Accounting

How to Classify Workers

One of the steps we recommend to clients that use independent contractors and therefore face a heightened risk of a costly IRS payroll tax or benefits audit is a quick review of some of the key things the IRS tells its agents to look at in determining whether a worker is an independent contractor or an employee.

The primary inquiries fall into three categories. Who has financial control of the job? Who can exercise control over how the worker performs the specific task? And how do the parties themselves view the relationship? When reviewing the checklist, keep in mind that the IRS will make its decision based on the whole picture, not just a single factor.

Workers are more likely to be classified as independent contractors if they:

  • Make a significant investment in business property, such as tools;

  • Pay their own business expenses;

  • Receive a flat fee that is not based on an hourly or similar rate;

  • Are not prohibited from doing work for other companies;

  • Can pay subcontractors to get the job done;

  • Are not performing services as an integral part of your regular business;

  • ​Have a contract with an enforceable liquidated damages provision;

  • Can make a profit;

  • Can suffer a loss.

  • Are licensed and have a substantial amount of flexibility, as in the case of associates.

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