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 who don’t think about how to proceed. So, today we will discuss the advantages and disadvantages of contracted work. In addition, we will talk about a significant pitfall you must avoid when you begin your first independent contractor job. Let’s start!
Reasons To Become A Gun For Hire
Independence allows radiologists to contract out with multiple groups. 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 five or more different groups and facilities. Similarly, the more the independent contractor works, the more you can get paid. This workflow 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 typically 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 can significantly reduce your taxable income. Therefore, making more take-home income with the same salary is possible.
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 earnings 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, I 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? 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. Instead of working in an extensive 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 traveling 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 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 also rely on their work. If they don’t show up, you don’t get paid!
A Major Independent Contractor Pitfall
For those of you who go down the road of an independent contractor, you 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. Suppose you like the independence of working for multiple groups, getting paid as much as you work and being able to deduct certain work expenses. In that case, independent contracting has a certain allure. At the same time, it also involves different risks you must take. Additional rewards never come without some sacrifice!
