North Texas Dentistry Volume 9 Issue 1 2019 ISSUE 1 DE | Page 17
EXAMPLE: Dr. Smith hires Holly
the Dental Hygienist to fill in for a
hygienist taking six weeks’ medical
leave.
If Dr. Smith pays Holly as an
employee, Holly will:
• Sign a W-4 to have income taxes
withheld
• Have FICA tax withheld and
matched by the office
• Receive a W-2 in January of the
following year showing wages
earned and taxes withheld
• File her IRS taxes showing earnings
and deductions
If Dr. Smith pays Holly as an
independent contractor, Holly will:
• Not sign a W-4 since she is not
classified an employee
• Have no taxes withheld
• Receive a 1099 in January of the
following year if more than $600
was paid
• Report all earnings regardless of
receiving a 1099 or not, as well as
pay all her own FICA taxes and self
employment tax (roughly 15% of
earnings – 12.4% Social Security
and 2.9% Medicare
(source: IRS Self Employment page);
some tax experts suggest saving
30% of earnings to pay self
employment taxes. If taxes are not
paid quarterly, she may face
penalties and risks being audited by
the IRS.
the employee’s share of uncollected
Social Security and Medicare taxes due
on their compensation. If the IRS deter-
mines that Holly was misclassified as an
independent contractor, Dr. Smith will
be liable for matching all back FICA
taxes and may likely be assessed a
penalty for the misclassification.
Lastly, if Dr. Smith uses a staffing agency
to help with placing Holly the Dental Hy-
gienist, Dr. Smith can be confident that
the staffing agency serves as Holly’s em-
ployer of record, pays Holly as employ-
ees, and invoices Dr. Smith’s office for
Holly’s hours worked as well as any ad-
ministrative costs or agency fees. Refer-
ral services operate such that Dr. Smith
serves as Holly’s employer of record and
pays Holly directly and the referral serv-
ice will invoice Dr. Smith an administra-
tive/agency fees. The arrangement with
any referral agency (who generally do
not serve as the employer of record)
could expose Dr. Smith to an IRS or
TWC audit in order to ensure the em-
ployment relationship is properly classi-
fied as employer/employee, especially if
Holly files an SS-8 or Form 8919.
In conclusion, hiring a dental professional
as an independent contractor may violate
the Texas Dental Practice Act as well as
TWC and IRS guidelines if the job does
not meet the necessary requirements.
Such misclassification can result in back
taxes and penalties, not only for the den-
tal practice but also for the dental profes-
sional if self-employment taxes are not
properly calculated, reported, and paid.
Audra Morris joined her
mother, Nitia Morris, at Den-
tal Auxiliary Service, Inc. in
2011 and opened an office in
Austin in 2012. Dental Auxil-
iary Service, Inc. has helped
dental offices in the Dallas
area with temporary and permanent staffing
needs for over 40 years. Dental Auxiliary Service
is also a founding member of the Texas Dental
Placement Network, a network of dental staffing
agencies serving seven metro areas in Texas.
Send email to [email protected] or call
(214) 522-2008 for more information.
While it can seem like less of an admin-
istrative burden to pay Holly the Dental
Hygienist as an independent contractor,
it does violate the Texas Dental Practice
Act as well as TWC and IRS regulations.
If Holly is paid as an independent con-
tactor and has no taxes withheld by the
office, she can file a form with the IRS,
Form SS-8, to have the agency determine
the employee/independent contractor
status of the employment relationship.
Additionally, Holly and all workers who
believe an employer improperly classi-
fied them as independent contractors
can use Form 8919 to figure and report
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