> ## Documentation Index
> Fetch the complete documentation index at: https://www.practiceownersguide.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Hiring: W-2 vs. 1099

> Classifying clinicians and staff correctly, because misclassification is the most expensive shortcut in practice ownership.

<Note>
  Not legal advice. Classification rules are state-specific and enforcement is
  active. When in doubt, W-2.
</Note>

## The rule of thumb

If you control **how, when, and where** someone works, set their schedule,
provide the equipment and the patients, they are a W-2 employee, whatever the
contract says. The IRS and states look at behavioral control, financial
control, and relationship, not the label.

| Role                                                               | Usual answer                                               |
| ------------------------------------------------------------------ | ---------------------------------------------------------- |
| Front desk, assistants, hygienists, nurses                         | W-2, almost always                                         |
| Associate clinicians working your schedule on your patients        | W-2 in most audits, even though 1099 is common in the wild |
| True locum/per-diem covering occasional days, multiple practices   | 1099 can hold up                                           |
| Specialists renting your space with their own patients and billing | Usually their own practice, not your hire                  |

California and states with ABC tests are stricter still: 1099 clinicians
inside your core business rarely survive scrutiny.

## Why it matters

Misclassification costs back payroll taxes plus penalties and interest,
retroactive benefits and overtime claims, and unemployment or workers' comp
assessments, typically surfacing when a "contractor" files for unemployment.
The 1099 savings are an illusion: you save \~7.65% employer payroll tax and
carry all of that risk.

## Doing W-2 right

Payroll from the first hire ([payroll setup](/guides/payroll-benefits-retirement)),
workers' comp active, I-9 and state new-hire reporting, exempt/non-exempt
classification for overtime, and an offer letter plus handbook basics. For
associates, put comp formula, malpractice tail, and restrictive covenants in
the agreement ([comp models](/guides/associate-comp-models)).

## Related

* [Associate comp models](/guides/associate-comp-models)
* [Payroll, benefits, and retirement](/guides/payroll-benefits-retirement)
* [Ownership paperwork](/guides/ownership-agreements)
* [Bring on associates or partners](/guides/associates-vs-partners)
* [Malpractice and business insurance](/guides/malpractice-and-insurance)