27th Jun 2008
What is an “Associate” ? Employee or Independent Contractor?
The contract says, “Associate Agreement.” What does this mean?
I’ve probably talked about this before, but I saw a discussion on a chiropractic discussion board recently about this subject, so I thought I would talk about it again.
First, understand that “associate” is not a legal employment term. That is, the IRS and the states do not recognize this term. They want to know if the person is an (a) employee or (b) independent contractor. You can call it what you want, but these are the only two terms that have any meaning.
Second, the IRS assumes that someone is an employee unless there is compelling evidence that they are not (i.e., that the relationship is independent contractor). This means the worker must (1) have income tax withheld from his/her pay and (2) the worker and employer must share in their contributions to FICA/Medicare.
The IRS has criteria for determing if a worker is an employee or independent contractor, based on three factors: financial control, behavioral control, and nature of the relationship. Read IRS Tax Topic 762 for more information.
Now, I’m not telling you not to sign a contract. I don’t give legal or accounting advice. I’m just telling you that you need to be aware of what the doctor thinks it is and what that means to you. If the doctor is considering you an independent contractor, you will have to pay your own FICA/Medicare (”self-employment taxes”) and you won’t have any withholding to use to pay your federal, state, local income tax.
If you have questions about this, or you have a contract you want me to take a look at, I would be happy to do that. Remember, no legal or financial advice.
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