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Even Superheroes Have Sidekicks – But Are They Taxable?

Does Your Dental Practice Need An Employee Or An Independent Contractor?

Employee Independent Contractor - Dental CPA

When you hire another dentist to assist your growing practice as a full-time employee you have more control over that individual’s profession. From establishing how many hours they will work to what responsibilities they will take on in their new role, in many ways it makes sense to bring on somebody who will help share the workload on a regular basis. But expanding your full-time work force comes with a variety of considerations on your end. Health insurance, space and equipment and insurance costs are all responsibilities that will fall on you as the owner and manager of your facility. Independent contractors, on the other hand, carry the responsibilities of managing these costs themselves.

The days are getting longer and warmer, and you are probably thinking about how nice it would be if you could pack up your bags and take off on a much-needed vacation. But alas, skipping town for a week or two means that you would have to close the practice for the duration of your holiday, which is simply not an option. Unless you have already figured out a way to clone yourself, the best solution may be to hire an associate dentist or an independent contractor who can help by taking on a portion of the work and can help cover for you when you are out of the office.

Read: Differences Between Employees and Independent Contractors

Whether or not you have plans to take a vacation this year, the simple fact is that there will be times where you simply won’t be able to make it into the office. Life happens. Business opportunities happen. And sooner or later something will happen outside of work that will require your attention. How will you handle that situation? You could hire another dental professional to join your team to help during those planned (or unplanned) absences. However, before you start accepting applications, make sure you have a clear vision of what you need from this person and whether it’s in your best interest to hire an independent contractor or an employee.

Define What Kind Of Help You Need

When you hire another dentist to assist your growing practice as a full-time employee you have more control over that individual’s profession. From establishing how many hours they will work to what responsibilities they will take on in their new role, in many ways it makes sense to bring on somebody who will help share the workload on a regular basis. But expanding your full-time work force comes with a variety of considerations on your end. Health insurance, space and equipment and insurance costs are all responsibilities that will fall on you as the owner and manager of your facility. Independent contractors, on the other hand, carry the responsibilities of managing these costs themselves.

That said, it may be easy to make the decision to hire an independent contractor only to fill in for you one or two days a week, but if you aren’t fully aware of how the Department of Labor (DOL) and Internal Revenue Service (IRS) classifies the two, you could be opening yourself up to a litigation.

Make sure you are clear on the characteristics between employees and independent contractors. If you continue to be unsure, reach out to financial professional for assistance.

Top 10 Questions To Consider Before Hiring

When determining whether that extra help should be classified as a regular employee or an independent contractor, ask questions that will identify who has control over this individual’s work-related behavior, finances and relationships.

  1. Will I have control over when, where and how this individual works or do they retain the majority of the control?
  2. Will I set the compensation rate of the individual?
  3. Will I need this person to fill in for a long period of time?
  4. Will I invest significant resources into the training and compensation of this individual?
  5. Will this individual be expected to exclusively work for my practice?
  6. Will I be responsible for paying employment taxes on this individual?
  7. Will I provide this person with any benefits such as insurance, retirement, vacation, and/or disability insurance?
  8. Will I retain this professional relationship for a long period of time?
  9. Will I require this person to be responsible for with key business activities?
  10. Will I have to provide guidelines to help govern how this individual will conduct themselves while working within my practice?

Did you answer “yes” to any of these questions? If so, there’s a pretty good chance that the person you are considering hiring will be an employee. But if you continue to have questions about their classification and your responsibilities as an employer, contact the Bright Dental CPAs at Rea & Associates to learn more.

By Dan Bialek, CPA (Mentor office)

 

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Should I Hire My Spouse To Work In My Dental Practice?

Hiring Spouses - Dental CPA

As with most things, the answer with the question: Should I hire my spouse to work in my dental practice, isn’t an easy one to answer and everybody’s situation is different. What may be an optimal decision for one couple may bring about nightmarish consequences for another. Contact your Bright Dental CPA to learn more.

The dynamics that make up the different facets of your life are unique. The time you spend with family and friends is different than the time you spend with your clients and coworkers and the majority of people are quite happy to keep these two lives separate. But there are others who see the prospect of working together with their spouse as a personal and professional benefit – dental practice owners are no exception. In fact, I frequently field such questions from dental practice owners, all seeking more insight into the financial benefits (and drawbacks) of hiring their spouse.

Read: Debunking Common Personal Finance Myths For Dentists

As with most things, the answer with the question: “Should I hire my spouse to work in my dental practice,” isn’t an easy one to answer. Hopefully this list will provide you with some unbiased advice to help you come to a conclusion that makes sense for your unique situation.

The Pros

  • Ohio Small Business Tax Deduction – As long as you own at least 20 percent of the dental practice and the practice is located in Ohio, you can deduct your spouse’s wages as part of the Ohio Small Business Tax Deduction. Depending on how much they make, this could mean significant tax savings for you.
  • Retirement Savings – Your spouse’s wages will likely qualify them for your practice’s retirement plan, which will help grow your combined retirement nest egg.
  • Child Care Tax Credit – If you have children who are currently enrolled in day care or an eligible school program, you may be eligible to claim a tax credit. This credit is only available if both parents are working; and since you and your spouse are working under the same roof, the credit is up for grabs.
  • Social Security Savings – In addition to saving for retirement, your spouse will also be able to make payments into Social Security. In the short term they will see a reduction in their regular take-home pay, but as soon as they start claiming the benefit during retirement they will receive increased payments, which are based on the duration of their work history.
  • Travel Expense Ease – It is easier to deduct travel expenses if you are attending a seminar, as the IRS more readily allows deductible travel expenses of your spouse if they are an employee of the practice.
  • Peace of Mind – With your spouse working for your practice, you can avoid hiring an extra employee to do the same work. Any savings would benefit your personal bank account.

The Cons

  • Dramatic Dynamic – Just because your spouse is now a part of your practice’s team, doesn’t mean that drama will ensue – but it could. At least on a small scale, the addition of your spouse will cause the overall office dynamic to change. Whether that change is good, bad or just plain ugly depends a lot on your management style. If you hire your spouse to work for your practice, be sensitive to the feelings of the other team members while being mindful of any changes in office dynamics.
  • Separate But Equal – In order for this arrangement to work, you must be able to separate work issues from personal issues. We all have a bad day now and then, but if that bad day originated at home, you can’t carry it with you into the office. If you have any doubt whether you can effectively separate your home life from your work life, maybe hiring your spouse isn’t the right decision.
  • Soaring Social Security – Even though your spouse will be paying into Social Security, a good thing in the long term, you may not be happy to get the bill, a drawback in the short term. For example, if your wages as a dentist exceed the Social Security limit of $118,500 for 2015, paying your spouse instead of yourself will result in 6.2 percent extra taxes – or the Social Security portion of payroll taxes.

Everybody’s situation is different and what may be an optimal decision for one couple may bring about nightmarish consequences for another. Do not take this decision lightly. Email the Bright Dental CPAs at Rea & Associates to learn more.

By Dan Bialek, CPA (Mentor office)

 

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Rea & Associates, Inc. | Bright Dental CPAs | 7201 Center St, Mentor, Ohio 44060-4858
phone + 440-266-0077