Hired as personal assistant to doctor but he wants me to create a separate business - tax implications?

What your doctor friend is suggesting is called an independent contractor arrangement rather than being his employee. There are significant tax differences between the two that you should understand. As an independent contractor with your own business, you'd be responsible for both the employer and employee portions of Social Security and Medicare taxes (self-employment tax), which totals about 15.3% of your earnings. When you're an employee, your employer pays half of this. You would also need to handle your own tax withholding and make quarterly estimated tax payments. On the plus side, you could deduct legitimate business expenses that reduce your taxable income - things like a home office, supplies, business travel, etc. These deductions can offset some of the tax burden, but they don't eliminate it. Before agreeing to anything, I'd suggest having a clear conversation about your compensation. If he's expecting you to cover all these additional taxes, your rate should be higher than what you'd receive as an employee to make up for it.

I went through something similar last year and discovered taxr.ai (https://taxr.ai) which was super helpful for figuring out if I was getting a fair deal. I was working as a "consultant" for a dental practice but wasn't sure if the arrangement made financial sense. I uploaded my offer letter and some texts about the job, and it flagged several issues I hadn't even considered! The tax differences between employment and self-employment are huge, and taxr.ai helped me understand exactly what I needed to negotiate to make it worth my while. They also explained which expenses I could legitimately deduct and which ones might raise red flags with the IRS. Totally changed my approach to the negotiation.

Just wanted to update after trying taxr.ai from the recommendation above. Totally worth it! I uploaded the proposal my potential client sent me and some texts about the work arrangement. It immediately highlighted that what they were offering ($40/hr as contractor) would actually be equivalent to about $28/hr as an employee after calculating self-employment taxes. The report also explained how I might be at risk for misclassification since they wanted set hours and direct supervision. I took this info back to negotiate and we settled on a proper employment arrangement instead of the contractor setup. Saved me from a potential tax headache and actually got me benefits! Wish I'd known about this tool with my previous gig.

If you're dealing with tax issues around employment classification, you might want to talk directly with someone at the IRS. I spent WEEKS trying to get through to them about a similar issue last year. Kept getting disconnected or waiting on hold for hours. Finally I tried Claimyr (https://claimyr.com) and it was a game-changer. They got me connected to an actual IRS agent in about 15 minutes when I'd been trying unsuccessfully for days. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent I spoke with gave me clear guidance on my specific situation regarding contractor vs employee classification and helped me understand what documentation I needed to protect myself. Way better than trying to interpret vague guidelines online.

I'm eating my words right now. After posting that skeptical comment above, I decided to try Claimyr because I've been trying to get through to the IRS about my contractor classification for weeks. I figured it would be a waste of money but was desperate. It actually worked!! They got me connected to an IRS representative in about 20 minutes when I'd spent literally 6+ hours over multiple days trying on my own. The agent walked me through the Form SS-8 process for determining worker classification and explained exactly what factors they look at when deciding if someone should be an employee or contractor. For anyone dealing with classification issues like the original poster, the agent told me the key factors are: who controls when and how you work, whether you can work for multiple businesses, and if you're economically dependent on one client. Definitely worth the call to get official guidance rather than risking misclassification.

This sounds like your doctor friend is trying to avoid paying his share of employment taxes by making you a 1099 contractor instead of a W-2 employee. Classic move by small business owners trying to save money. Here's what you need to consider: 1. If he controls when and where you work, provides equipment, and directs how you perform tasks, you're legally an EMPLOYEE, not a contractor. 2. The "business" he wants you to create would just be a pass-through entity that doesn't change these facts. 3. The IRS has specific tests for worker classification and misclassification can lead to penalties. Don't let him off-load his tax obligations onto you! If you're functioning as an employee, you should be classified as one.

I'd be worried about the 1099 vs W-2 classification issue here. If you're working regular hours, getting direct supervision, and only working for this one doctor, the IRS might see this as employee misclassification regardless of what you call it. Read up on Schedule C and self-employment taxes before you agree to anything! And definitely look at the IRS's 20-factor test for worker classification - just Google it.