The Difference Between Hiring Therapists As 1099 vs. W-2 (part 1)

Should you hire additional therapists for your practice as 1099 or W-2 employees? I'll walk you through the decision process in this blog series so you can make an informed decision.

If your private practice is thriving and you are considering hiring additional therapists, one of the major questions is how to structure the employment relationship. Should you hire additional therapists as a 1099 contractor or W-2 employee?

In my private practice consulting experience and based on recent discussions in my Private Practice Toolbox Group it seems that most private practice therapists favor hiring therapists as 1099 contractors. When I ask why I often hear something like, "I hire 1099's because then I'm not responsible to pay the therapists employment taxes and it provides some cushion against legal responsibility for the acts of therapists providing contract services." While these statements are true, there is a lot more to consider when structuring the employment relationship and misclassification can be a costly mistake.

So what what's the difference between hiring a 1099 and W-2?

An 1099 independent contractor is a tax-related and legal term referring to an individual who contracts his or her services out to other businesses. An independent contractor is considered self-employed and is not considered an "employee" of the practice. The 1099 workers pays all of their own income tax in addition to self-employment taxes.

"Independent contractors do the work where, when and how they choose. Nobody tells them what order to do the job in, what hours to work, or when they can take off, " says Employment Attorney, Donna Ballman, author of How To Stand Up For Yourself Without Getting Fired.

A W-2 employee is an official employee of a company, or a private practice, whose taxes are withheld from and whose earnings are reported to the IRS at the year-end via a W-4.  The practice owner participates in paying the employees state and Federal taxes and has the ability to control how, where, and when the work is performed by the employee.

Michigan attorney Donald A DeLong says that control is the key issue. "If you control when the therapist works, where he/she works, how and when he/she gets paid, you require that he/she use your equipment, etc., then that worker is a (W-2) employee."

As I've researched this topic it is clear that there are no easy answers and a lot of grey areas. I hope to share some helpful information and resources over the next several posts to help you make the best choice when it comes to hiring.

The costs of inaccurately classifying employees

Inaccurately classifying workers can be very costly to an employer warns Vincent Porter, CPA of Porter & Company CPAs in Arlington Tx. Porter shares these words of caution with employers.

The IRS can conduct an audit of a business that is paying employees on a 1099 and hit them with back payroll taxes that can be very costly to a business not in compliance. This is a big issue we face almost daily with clients. They should understand that if they were to be audited by their State Unemployment agency or IRS they could face severe penalties for improperly classifying employees as contractors. Not only could they face unpaid employment taxes they could face heavy penalties.

In my next post in this series I'll tell you about my employment tax audit experience a few years ago!

Zach Klein via Compfight

6 Reasons You Don't Have Enough Clients

Getting and keeping clients is a common struggle for private practitioners. Here are 6 potential barriers to a full practice and what to do about them.

1) You're not keeping the clients you have

It takes a lot less time, money, and energy to keep a client engaged in meaningful therapy than to find a new client. Keeping clients engaged in the therapeutic process requires additional skills. New skills might include setting expectations during the initial session that therapy is an on-going process. Recommend  that new clients schedule ahead 3-6 weeks (depending on your assessment of their need during the first session) instead of scheduling one week at a time.

Another strategy that will boost client retention is reaching out to clients who've dropped out of treatment without proper termination. I encourage my team of therapists to do this regularly by writing a hand-written card with their business card enclosed to clients who have not returned to therapy. The cards say something like, "You've been on my mind. I want you to know that I am here if you need me. If you'd like to take a break from therapy for a while that's fine. I'd like to offer you a free 25 min "wrap up" session where we can say goodbye." Many clients are very touched by this gesture and it is just the encouragement they need to continue coming to therapy. Even if clients don't continue in therapy, you've modeled how to say a healthy "goodbye".

2) You're not offering anything valuable to potential referral sources

I love that I'm approached regularly by a therapists trying to network and ask for referrals. You know the ones who I will refer to? I will refer to the therapists who approach our relationship as a mutually beneficial relationship. I am more likely to refer to therapists who, in addition to asking for referrals, offer their time, expertise, or referrals to me and my practice.

Several years ago I had a therapist contact me asking if I would refer couples to her for therapy. While she did offer to take me to lunch (which I didn't have time to do) she wasn't offering herself as a resource to me in any way. Additionally, I was annoyed because had this therapist had done her homework and looked at my website she would have seen that I work with couples and that I have several colleagues at my clinic who also work with couples. The key to developing strong referral relationships is to create mutually beneficial relationship, offering yourself as a resource to the other person.

3) Your online presence is weak

Have you Googled yourself lately? Have you searched for key terms in your geographic location to see where your website ranks? Potential clients are searching for therapists online and will generally click on websites listed on the first page or two of Google searches. If your information is easily found make sure the information found about you and your practice is accurate. Here are some resources to help you strengthen your online presence and make it easier for new clients to find you.

Does Google love your therapy practice? 5 elements of an effective practice website 4 reasons to start creating online content

4) You're not as good as you think you are

Most therapists think they are more effective than they actually are.  Therapists, like any other professionals have varying level or skill and success, but it seems that on the whole we are an overly-confident group.

A 2003 survey asked 143 counselors to grade their job performance on a scale from A to F... Of the counselors, 66 percent rated themselves as A or better. None saw himself or herself as below average (Sapyta, Riemer, Bickman, 2005, p. 147).

How do you find out if your clinical skills are above average, mediocre, or below average therapist? Start collecting outcome data from your sessions. A few years ago I tracked every session using the ORS and SRS rating scales for an entire year through MyOutcomes.com. This allowed me to establish a baseline, track each client's progress, and see where your scores fall compared to therapists around the world. I was relieved to know that according to these ratings scales I was indeed an "above average"  therapist, but I was not as good as I thought I was.

5) Your attachment style is sabotaging you

A therapist's own attachment style and relationship history impact their ability to keep clients engaged in meaningful therapy and maintain consistent referral sources. While I only have anecdotal evidence, my experience training therapists in a private practice setting suggests that therapists with a secure attachment style or slightly anxious attachment do better in private practice setting than therapists who lean toward the avoidant end of the attachment continuum. Additionally, if therapists have done their own work in therapy and have a handle on their own issues, they tend to be more successful than therapists who haven't resolved their own emotional wounds. If you're having a difficult time getting or keeping clients, may I suggest calling your own therapist and working on your own attachment issues?

6) You appear desperate

Therapists who are new to private practice may feel particularly overwhelmed by the details of running a business, and the difficulty of establishing a consistent clientele. Feelings of desperation are also felt by seasoned therapists whose client numbers ebb during seasonal changes, economic conditions, or other reasons.  Potential clients and referral sources can "sniff out" desperation, and whether they are consciously aware of it or not, they will be less likely to trust you and your services. Here are some questions to ask yourself to see if you're coming off as overly desperate.

• Have you become  too accommodating when it comes to scheduling clients?
• Do you feel overly discouraged if a new referral chooses not to schedule with you?
• When talking about your practice do you talk fast and feel anxious inside?
• Do you follow up with potential referral sources more than once a month?

I suggest  that you "act as if" and "talk as if" you have a moderately busy practice. Lead with the aspects of your practice and your expertise that you are confident in and you'll find more success getting and keeping clients.

References:

Sapyta, Jeffrey, Manuel Riemer, and Leonard Bickman. “Feedback to Clinicians: Theory, Research, and Practice.” Journal of Clinical Psychology: In Session 61, no. 2 (2005):145–53.

Ani-Bee via Compfight

A Day In The Life: Meet Relationship Expert Dr. Meredith Hansen

When I "met" Dr. Meredith Hansen on Facebook and Twitter recently I was struck by her cohesive online presence. Rarely have I come across such an impeccable private practice website and a therapist who has such clarity in her private practice message: "Helping individuals and couples find love, get love, and keep love."

If you want to see an example of a powerful practice website and clear practice message visit DrMeredithHansen.com. Dr. Hansen projects a nice blend of accessibility and professionalism that make me feel confident referring clients to her practice.

I'm not the only one who feels confident in Dr. Hansen's skills. Professional men and women in their late 20’s to early 40’s who are hoping to find love, coping with a relationship breakup, or want to improve their current love relationship are seeking her clinical services.

Dr. Hansen also offers pre-marital and newlywed counseling and enjoys helping couples adjust to married life. With a waiting list of new clients Dr. Hansen's plans to on bring on a psychological assistant to supervise who will see her overflow clients.  What does it take to build a relationship focused private practice? Look into "a day in the life" of relationship expert Dr. Hansen.

A Day In The Life

January 9, 2012

6:30AM – 8:00AM

Woke up early and headed out to the gym. I didn’t want to go today, my bed was warm and comfortable, but I knew it would make me feel energized and ready for the busy day ahead.

8:00AM – 8:30AM

Came home and made my favorite green smoothie for breakfast. Checked in with my husband before he left for work and responded to a few client emails requesting appointment changes during the week.

8:30AM – 9:30AM

Showered and got dressed.

9:45AM – 10:00AM

Drove to work and listened to my new website “opt-in” recording.

10:00AM – 11:00AM

Arrived at my office and reviewed my caseload for the day. Entered weekly sessions into www.officeally.com, entered billing information, paid a few private practice bills (Farmer’s office insurance and Sparkletts), completed unfinished progress notes, returned a phone call from a potential new patient requesting an appointment, updated my practice waiting list in Google Docs.

11:00AM – 12:00PM

Worked on new relationship improvement product that I will launch next month. Recorded 7 short audios and finalized the corresponding handouts. Sent an email to my friends who are “testing” the program in order to get their feedback on the content so far.

12:00PM – 1:00PM

Grabbed lunch from a little deli down the street and reviewed content from a business training program I am participating in. Ate my sandwich while listening to the training recordings and made a “To Do”/goal list for the week. Visited my Facebook Page to respond to any comments or posts by my followers and checked in on Twitter to build online relationships.

1:00PM – 7:00PM

Saw 6 therapy clients. Wrote progress notes between sessions in order to reduce my paperwork during the week. (This is always a goal. Some days I am better at this than others.)

7:00PM – 7:15PM

Drove home and listened to the rest of my new website opt-in recording.

7:15PM – 8:00PM

Arrived home and made dinner with my husband. Asked about his day, discussed our schedule for the month, and cleaned up the kitchen.

8:00PM – 9:15PM

Watched TV with my husband. Checked in on Facebook again to respond to any evening comments or posts. Reviewed schedule for tomorrow. Responded to a recent request for a guest blog post. Reviewed the website of the woman requesting the post in order to assess if it would be a good match. Brainstormed some ideas for this post and outlined my next blog post.

9:15PM – 10:15PM

Got ready for bed and read a book a psychology focused book (I can’t get away from them). Listened to a brief mediation by Melanie Roche (always relaxes me and helps clear my mind). Kissed my husband and went to sleep…

Find out more about Dr. Meredith Hansen visit her private practice website.