Nurses – IRS Filling Status

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It’s time for Nurses to check their IRS Filing Status

As a nurse do you have a couple of options when it comes to getting paid?  — Are you an independent contractor or an employee?  Which one is correct for your situation? There are some caregivers who are being labeled as independent contractors by their staffing agencies, when they might be employees.  How could this affect you?  Most likely in a lot of ways.  On your side of the issue, if you receive a 1099, then you have to file as self-employed, which places an extra tax burden on you. Unfortunately, several staffing agencies are putting nurses through the IRS ringer by labeling them as independent contractors when they perform duties as an employee. In addition to being costly for nurses, this could be consider a misclassification according to the IRS.

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Avoiding Taxes as a Staffing Agency

One of the reasons that staffing agencies could be misclassifying nurses as independent contractors is to save money. If the agency can show that you are indeed an “independent contractor”, aka you are self employed, then the staffing agency that hires you to work does not have to file Social Security, worker’s comp or FIFA taxes on you. Who does? You do when it comes tax time.

If you are not prepared and knowledgeable about being self-employed, this could be a major expense for you come tax time and an expensive lessson. In addition to the regular tax bracket, ranging from 15 to 35 percent of your annual income, self employed (1099) filers have to pay an additional 15-plus percentage to cover their self employment taxes. If you are not aware of this scenario until you file your taxes, you could end up owing the Tax Man a ton of dough!

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A Costly Error for Nurses?

Why don’t staffing agencies hire caregivers as W2 then? Some do!  However, some don’t.  If you are filed as an independent contractor (1099) with an agency, then you are receiving a lot more money on your paychecks each time. For example, if you are making an hourly wage, you’ll get all of that money earned when it’s time to get paid.  Just know that as a 1099 contractor, nothing is getting set aside for taxes.

Sure, earning wages without taxes taken out on your paycheck sounds like the best deal ever. More money, right?  Wrong.  You still have to pay taxes – on your own.  For example, let’s say you will owe at least $2000 of what you made back to the IRS when it’s time to file your taxes. If you haven’t been aware of this situation from the onset, by the time you get your 1099, we hope you have been setting aside enough money for your tax payment, which might be in the thousands of dollars!  Ouch!

That is not all. If you are a self employed, independent contractor the IRS expects you to pay for your taxes quarterly. Yes, that’s right.  You should be paying your estimated tax payments quarterly.  This is to help you stay on budget throughout the year as you are responsible for sending in quarterly payments rather than waiting until the year’s end to file. Since you are in charge of paying for all of your taxes as a worker, this is the standard way of filing for you. However, if you are unaware of this and wait until April 15 to pay back your taxes you could owe an underpayment fee of hundreds of dollars. Tack that onto your tax payment and the cost keeps climbing.  It can turn into a vicious cycle if you can’t pay.

What if you can’t pay the IRS when it comes time to file your annual tax return? Well the IRS is prepared to offer you some options.  One option might be paying monthly until you have paid off your tax payment. There’s a catch. Just as with any loan, the IRS, being your lender, will charge you a fee. Here is the fee schedule for an IRS tax payment loan:

  • In addition to your monthly payment, you will have to pay a half a percentage worth of your total tax bill. So if you owe $10,000 you will have to pay $50 extra bucks for your first month.
  • Additionally, there is a loan processing fee of approximately $75 that is added to your loan payments.
  • Every month the percentage tacked onto your tax bill increases by half of a percent. So, the second month, if you owe at total of $9,500, after paying $500 for your first payment, you will owe an additional $95.
  • Each month the percentage tacked onto your tax bill will increase by a half of a percent, until the interest percentage is maxed out at 25 percent. Even though your overall tax payment will decrease each month with your on time payments, you will continue to pay approximately $95 extra on your loan payments to the IRS.
  • In the example here of a tax payment of $10,000, if you paid this down in 24 months at $416 per month, not counting interest, by the end of your loan you will have paid an additional $2,280 in interest loan fees.
  • By the time you pay off your taxes you will have paid the IRS approximately $12,335.

At the same time that you are paying the IRS $500 a month, don’t forget – you will need to save enough money to cover your tax payments for the upcoming year. So during May when you are paying back the IRS $500 for last year’s taxes, you’ll need to set aside 45 percent of your income to cover the taxes you will now pay in quarterly.

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Independent Contractors Classified

If you think you are rightfully classified as an independent contractor, take a look at the definition set aside by the IRS for your position:

“The general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done” according to Blue Pipes. Furthermore, the IRS states that “You are not an independent contractor if you perform services that can be controlled by an employer (what will be done and how it will be done). This applies even if you are given freedom of action. What matters is that the employer has the legal right to control the details of how the services are performed.”

OK so in plain English this means that if you have a company who is directing you on what, where and how to do your job, then you are an employee. Therefore you cannot be considered an independent contractor by that agency when they file with the IRS.   We feel that as an agency nurse, you are being told where to go work, what time to be there and what to do when you get there.  Also you need to where an agency badge with your name and the agencies name on it.  Has a a facility ever asked who referred you or do they ask what agency do you work for when you show up to work?

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Is anything being done about misclassification?

This is a hot topic among nurses, accountants and staffing agencies. A recent case in California, Noe v. Superior Court of Los Angeles, highlights the struggle for employees who are being wrongly classified. Taking their case all the way to the state’s superior court, employees hoped to get justification and support legally to protect them from misclassification. They were wrongly justified, as the court decided it was not the staffing agency’s fault. Since both the employees and the staffing agency were considered co-employers, the staffing agency could not be held liable.

What this means for you is that it is up to you to make sure you understand how you are being filed with the IRS dependent on your type of employment. So what are you supposed to do if you believe you have been wrongly classified as an independent contractor by your staffing agency?  Fill out the IRS Form SS-8 and let the IRS decide how you should be classified.  It’s a simple process and the IRS will let you know.

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Filing a SS-8 Form

If your staffing agency employer has been filing you as an independent contractor with the IRS, and you’ve been getting a 1099 as a self employed worker, then you owe it to yourself to find out if the IRS thinks you are a true, 1099 independent contractor or you should have been classified as a W2 employee. As a result, you have the right and responsibility to file a SS-8 Form. This IRS form could lead to changes in how you are classified by your staffing agency.   Wouldn’t it be nice to receive fair tax treatment as an employee rather than independent contractor having to handle your tax payments year after year? Let the IRS decide if you should be treated as the employee you may be, and informing your agency that they need to be wholly responsible for handling your taxes via W4 and W2s.

Here at Cure Healthcare Staffing all of our caregivers are W2 and we want to help you by getting the right answer from the IRS regarding classification for your nursing position . Contact Cure Healthcare Staffing today and we will provide you with the correct direction for filling out and submitting your SS-8 Form. As a leading healthcare staffing agency here in Texas we classify all caregivers as W2 employees and act as the Employer of Record.

Let us help you get clarification with your tax situation as a nurse working for a staffing agency in Texas.  Please fill out the Form SS-8 and email the completed form to hr@curestaffingcorp.com

Disclaimer: The views and opinions expressed in this article are those of Cure Staffing, LLC and do not necessarily reflect the official policy or position of any agency of the U.S. government. All data and information on this site is for informational purposes only.  Cure Staffing, LLC makes no representation to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be held liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use.  All information is provided on an as-is basis. They should not be utilized in real-world situations without speaking to a legal represenative. Assumptions made within the analysis are not reflective of the position of any U.S. government entity.