Should I Be An Independent Gun For Hire?
Nowadays, new radiologists may face a new choice, not as prevalent years ago. As such, you may work for one or more than one firm that allows the option of independent contracts or employed work. Most commonly, this decision exists for those who choose teleradiology. But other arrangements are also possible. So, what do you do? Do you operate as an independent contractor getting yearly 1099 forms? Or, do you take employment wages and receive a W-2 at the end of the year? Although this decision may seem innocuous, significant consequences await those that don’t think about how to proceed next. So, today we will discuss the advantages and disadvantages of contracted work. In addition, we will talk about a major pitfall that you need to avoid when you begin your first independent contractor jobs. Let’s start!
Reasons To Become A Gun For Hire
Independence allows radiologists to contract out with multiple groups. In fact, many employed positions muzzle the worker by outlining in the contract that they may not work with other groups or outside work. On the other hand, theoretically, as an independent contractor, you can work with 5 or more different groups and/or facilities. In a similar vein, the more the independent contractor works, the more you can potentially get paid. This differs dramatically from an employed worker that often has a fixed salary with perhaps, a small production bonus.
In addition to the ability to work with multiple facilities, the independent contractor can also deduct expenses from their income taxes. As a typical employed radiologist, you cannot write off items like fax machines, paper, health insurance, 401k plans, and more. When you work for yourself, all these deductions and more can significantly reduce your taxable income. For that reason, it is possible to make more take-home income with the same salary.
Then, of course, depending on how you structure your business, you may be able to take advantage of the new tax laws that favor corporations. For instance, you may depreciate capital equipment more rapidly over time. And, if your income dives below a lower threshold, you can deduct additional income as a pass-through corporation. Additionally, you may be able to put more retirement account funds away in a SEP-IRA versus an employed 401k plan. Whatever the case may be, I would highly recommend discussing the consequences of different corporate structures and tax ramifications with your accountant.
Becoming A Gun Is Not All Peaches And Cream!
What issues do independent contractors need to contend with? Well, maintaining contracts with different entities becomes your responsibility if you independently contract with multiple facilities. And, the loss of one or more contracts can devastate your finances if you rely on this income to sustain your household. No longer can you rely on your employer for your paycheck.
Working for yourself as an independent contractor can also become a lonely business. Opposed to working in a large practice with many other radiologists, some independent work can isolate you from your colleagues. For some, this can be a potential deal breaker.
Other issues arise such as having to travel from facility to facility to work. (if you work at multiple locales) If you have a more capital intensive business and for instance, you run remote computer software, you may need to fix the equipment if it goes down. Or, if you work from home and you have a power outage, how do you run your business. These questions do not have to cross the mind of the employed radiologist.
Finally, if you employ other workers/services, you rely on their work as well. If they don’t show up, you don’t get paid!
A Major Independent Contractor Pitfall
For those of you that go down the road of an independent contractor, you also must remember, what you take home you do not entirely keep. Naturally, you always have to save additional money for the taxman. More than that, you will also likely need to pay quarterly estimated taxes to prevent IRS penalties. Again, I would talk to your accountant about the details of your situation.
To Be Or Not To Be An Independent Contractor
Becoming an independent contractor as a radiologist certainly can have significant benefits. But, no job comes without its pitfalls as well. If you like the independence of working for multiple groups, getting paid as much as you work, and being able to deduct certain work expenses, independent contracting has a certain allure. At the same time, it also involves different risks that you need to take on. Additional rewards never come without some sacrifice!