Are you “independent” ?

Fascinating read regarding the status of whether a W2 is really a W2.    You see, the loss of most of the deductions that an employee still had for business expenses is largely gone now as a result of tax law changes.  That sucks.

But.. perhaps there is some salvation.   The Butts case, among others, resulted in a W2 getting himself reclassified as an independent contractor for purposes of deductions.  Yay, magic!

The key points from the available case law on this topic basically sums it up like this:  If you act independently, you are independent.   So, if your income is at risk (ie. production) and you are in control of your schedule and how you administer care (ie. your practice habits are largely of your own choosing, which is mandatory as it pertains to actual medical practice application), then there is a possibility you may actually be independent.

Many hospitals, in states where they can directly employ physicians (ie not Texas as an example) are concerned about classifying physicians as independent.   If reclassified from independent to employee the IRS gets mighty unhappy and seeks to recover taxes from the individual.   But if the individual has moved on or hasn’t the funds.. they turn to the hospital.  Rut ruh.

This concern is overblown as physicians by their very nature must be largely independent and most contracts state something along the lines of “nothing in this contract shall be construed as intefering with the physicans ability to conduct their practice in the normative fashion.”

So will it work if you go for it?  Maybe.   One can obtain a PLR (private letter ruling) but those take time and lots (20k perhaps) of money.   Since there’s been no case law since 1998 on the matter, its unclear.  If you happen to get a PLR, please share it with the rest of us.  Onward.. deductions!