Was Fired Dental Associate Classified as an Independent Contractor Incorrectly?

I just got canned yesterday because my boss found out I was shopping for a practice...

Now that I have some free time on my hands, I'd like to organize my finances.

The other associate that works there claims to be an IC.

The specialist claims to be an IC.

They both tell me how great it is to be INC. I have yet to incorporate.

I'm uncertain as to my status, and I'd like to get this straightened out.

I work(ed) Mon-Thurs. 9am-6pm.

My schedule was determined by the front office.

I don't get to keep the patients.

All tools, supplies, etc were provided by the employer.

So what now? Is there an easy way to get a ruling as to whether I'm an employee or IC?

Quote Jason P. Wood (Dental Attorney):

NO CONTRACT!?!?!?!? That is great news!!!! For you, not the owner.

1. Patients are yours for the plucking

2. You may want to let them know that you feel "uncomfortable" at being classified as an IC and are going to inquire from the IRS as to whether or not you in fact were, just so you can sleep better at night.

3. You can set up shop next door and no one can stop you.

Thanks for the info so far... I will file an SS-8 inquiry with the IRS.

Please keep the comments coming though. I'm sure there is more to it.

I would also appreciate information about any personal experiences with IRS misclassifications.

Quote Tim Lott, CPA, CVA (Dental CPA):

How long were you working there? Why are you even asking these questions now AFTER you've been canned? Why didn't it dawn on you to ask the question after your first check? Sorry, ignorance isn't an excuse in the eyes of the IRS. I’m not trying to be mean, those are just the facts.

At this point if they did not withhold taxes and you were not provided a paystub detailing your tax withholdings as an employee then you're an IC and by NOT questioning it after your first check I'd say you accepted that fact by default (or by your actions, or inactions) and you should just deal with it at this point.

That means figure out your net taxable income as an IC. Determine how much you want to contribute to a retirement plan. Determine how much home office expense you have to do your admin\books for your business. Determine the business use of your automobile and estimate if you owe any estimated taxes from Sept 15th.

I just think it's WAY too late to cry foul on the EE vs. IC issue AFTER you've been canned. You should have been raised after your first check if you were really concerned about it.

Just my opinion.

Just got my final check in the mail... and of course, it was short.

I guess the trickery and deceit continues.

Again, the EE vs. IC issue should have been addressed BEFORE you started or immediately after your first check. I suggest you work with what is and continue to move forward instead of worrying about what should have been. Certainly call them to the carpet on the amount you are still due.

P.S. I doubt you'll find "if someone else pays your assistant’s wages you’re an employee" on any government agencies checklist to determine EE vs. IC status. These checklists aren't industry specific.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

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Dental Fee For Service versus Dental PPO - Which Makes Better Sense?

I'm analyzing things right now and seriously considering going in-network with MetLife (PPO).

I have a FFS office now, and am only "in network" with Delta Premier. Although I am busy, I have extra capacity in the office--about 15% idle time. I advertise heavily and average 10-15 NP/month excluding emergencies. My area is competitive.

I've done a thorough fee analysis and had Charles Blair do a PPO analysis. Essentially I'd take a 15% hit off my normal fees on MetLife patients.

I currently have around 100 active MetLife patients now. MetLIfe is paying 100% of my preventative fees, but they are an utter incomprehensible mess when it comes to restorative. On crown/bridge my fees are generally within MetLife UCR, maybe off by 10%.

But I'm getting more and more questions from patients, especially on restorative, that basically ask My insurance says I save money by going to a network provider....and I can't argue with this.

My question is: How do you know when to need network participation? Has anyone gone from FFS to PPO, and what are the results?

We just met with a client to review their 6-month numbers. His gross production was up $44k and his write-off's were up $64k, so NET production was down $20k. So this guy worked harder to make less, why?

He wanted to be busier. He joined a few more PPO's including MetLife and got the influx of patients he wanted. Unfortunately they took the chair time of other better paying PPO patients and therefore made LESS money seeing MORE patients.

He had NO idea until we presented the numbers.

Make sure you DO THE MATH for YOUR specific situation!

Sandi can help you make the best decision!

Just to be clear, he produced $44k more and wrote off $64k more; therefore collected $20k LESS. He truly saw MORE patients and collected LESS. Not to mention the additional costs associated with that additional GROSS production of $44k. Maybe $4k in costs so he TRULY EARNED $24k LESS and worked harder to do that.

In THIS case it clearly backfired on the doctor.  If there's idle chair time and it can be filled with something, generally something is better than nothing as long as the ADDITIONAL costs do not outweigh the ADDITIONAL collections.

I think you're on the right path. I’ll try and make it really simple. Let's compare 2010, 6 months to 2009, 6 months:

2010, 6 month production was 1,044,000 and 2009, 6 month production was 1,000,000.

2010 "write-off's” were 364,000 and 2009 "write-off's" were 300,000 (write-off's = what insurance DOES NOT PAY)

Therefore, NET production through 6 months of 2010 was $680,000 and it was $700,000 through 6 months of 2009.

NO FEE INCREASES IN 2010 FROM 2009 FEES.
This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

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Dentist Should Distinguish Between Needs and Wants for Bank Loan

I am in the process of refinancing my practice loan. I have $180K left on the loan at 6.25% and a credit line of 30K with a variable interest rate. I have an offer to consolidate the loan and the credit line for a total loan amount of $210K at 3.99% in a SBA 5 year loan. Rate would be lower if paid off faster.

My financial advisor loves the cheap money and wants me to take more "working capital" money out to either buy equipment or pay other higher interest loans. The practice revenue is $840K gross collections.

The practice was purchased in 2008 and is in need of new dental chairs/delivery systems for the two restorative ops and leasehold improvements like new flooring, re-staining of cabinets, new lighting, and updated sinks. I am also considering Cerec technology.

The banker tells me the cash flow can support a larger loan amount up to about 300k at the fixed rate but they want specifics as to what would be purchased and a 90 day timeline.

 I am feeling pressured as I had not planned to do the improvements now. The banker also says that I could take out a separate loan when I have a better plan for the renovations/purchases, but my financial advisor doesn't like this option due to the interest rate risk.

Please advise on what steps you would take in this situation.

Jason P Wood

3.99% fixed? That's unheard of so take it.

Yes, of course I'll take it, but I need to figure out what to do about the extra 90K? I have no current business plan for the equipment.

Tim Lott

What are the other "high interest rate loans"?

You say you need new things, but just not now. When?

I agree, 3.99% is cheap, cheap, cheap. If I had a NEED for the $90k in the next 12-18 months I'd have to grab it and park it until I NEEDED it. If these purchases are 24+ months away, the longer in the future the "need" is, I wouldn't take the extra $90k.

Just make sure you know the difference between "needs" vs. "wants".
I am looking to replace my 2 1978 Pelton Crane restorative chairs with new chairs and delivery systems. I'm looking into ADEC and Belmont and do not have quotes yet as I'm waiting for the CDA convention Sept. 10th to test out all of the chairs. I feel I NEED the new chairs for ergonomics as I currently am using rear delivery and it is killing my back. The new chair purchase, though, brings up other redecorating items in the office.

One thing leads to another and another. I am absolutely ready to get the chairs and delivery systems, especially at this low rate, but I'm not sure I'm ready to re-stain cabinetry, do new flooring, repaint the office and do the new light fixtures just yet. It would involve closing the practice for a period and we did that already this year for some other renovations. So, I could try to replace the chairs and delivery systems now and do the rest later.

Obviously it is good to have a master plan and timeline for the renovations which I do not have right now. I need to get a decorator and contractor out to my office first.


The other loans at a higher interest rate are personal loans- mortgage and line of credit on my home. We are trying to re-finance the house at a lower rate and need to put more principle toward the home for the lender to re-finance.

So, this extra cash from the business loan after doing the chairs would allow me to transfer some of the money from my current business savings account to a personal use and save me about 12K per year after the mortgage is refinanced. The refi of the dental practice is going to save me 4K on the year, so between the two, a total of 16K per year savings.

But, the bank will only lend for equipment and improvements that are actually done. My financial advisor is trying to find a way around this and just have the bank categorize it as "working capital", but I doubt it will happen.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

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How to Buy a Dental Practice, Part 4 - Record Keeping and Post Sale Questions

As Dental CPAs, we often receive calls from dentists looking to purchase a dental practice. We have put together a series of videos to help dentists answer the question, "How Do I Buy a Dental Practice?".

In this video we discuss how to wrap up the transition process, chart of accounts set-up, record keeping, and post sale questions. For more information visit our website: http://www.dentalcpas.com/

View the How to Buy a Dental Practice, Part 4 - Record Keeping and Post Sale Questions video.

Tim Lott, CPA, CVA


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