Employee or independent contractor: considerations for dentists

This post is general education from Copeland Consulting Services. It is not legal or tax advice. Worker status carries tax and wage consequences. Ask an attorney and a CPA about your facts.

What is the difference between an employee and an independent contractor?

An employee works under the employer’s control. A contractor runs their own work and their own business. The ADA says dental associates are generally employees “if their employer has the right to control how duties are performed.” Control can cover when and where you work, the equipment you use, the procedures you follow, who you work with, and which patients you see.

The ADA contract guide describes an independent contractor as “a self-employed professional who exercises independent judgment and renders services as specified in a contract.”

How do the two arrangements compare?

The ADA page lists the differences. The table condenses them.

The ADA adds a trade-off. Contractor status may seem more expensive and work-intensive, but it may bring “the relative freedom to set your own schedule and the flexibility to work in multiple locations.”

Does the contract label decide the question?

No. The ADA contract guide says how the agreement labels the dentist “is of relatively little significance.” It says “the actual relationship, based on numerous factors, is what will control when the government looks at the relationship.”

The ADA page makes a similar point. The practice usually decides and writes the terms down. Still, “all businesses must follow federal regulations that govern employment status,” and federal agencies have defined tests.

What does the IRS look at?

The IRS weighs facts about control and independence in three groups. Its page describes them this way:

1. Behavioral: does the company control or have the right to control what the worker does and how?
2. Financial: does the payer control the business side of the job, such as pay, expense reimbursement, tools and supplies?
3. Type of relationship: are there written contracts or employee-type benefits, will the relationship continue, and is the work a key part of the business?

The IRS says there is no set number of factors that decides the question and no single factor stands alone. It also says to “document each of the factors” used in the decision.

On dentists, the IRS says people such as doctors and dentists “who are in an independent trade, business, or profession in which they offer their services to the general public are generally independent contractors.” It then adds that the answer “depends on the facts in each case.”

If status is still unclear, the IRS points to Form SS-8, which either the business or the worker may file. It notes a determination can take at least six months.

What does the Department of Labor say?

The Department of Labor focuses on wages. A worker is entitled to minimum wage and overtime under the Fair Labor Standards Act when there is an employment relationship. The agency says misclassified employees “may not receive the minimum wage and overtime pay” or other protections they are owed.

The page, as opened on 2026-10-26, describes a Wage and Hour Division rule published January 10, 2024, found at 29 CFR Part 795. Federal rules can change, so ask your attorney which version applies today.

Why might a practice choose one arrangement over the other?

The ADA contract guide gives reasons for each. A practice may choose an employee when it wants a longer-term relationship and more control over how and when work is done. It may choose a contractor to bring in a specialized skill, cover a leave, or make more use of the office. The guide adds that a practice may also want to save on labor costs, since benefits are often a significant share of employee pay.

The guide is direct about misuse. It says that in most cases of mischaracterization, “the employer preferred to characterize an ‘employee’ as an ‘independent contractor.’” That is a reason to read the contract and the facts of the job side by side.

What are the consequences of each status?

The ADA contract guide describes the legal differences in plain terms. A contractor files and pays income, employment and Social Security taxes individually. A contractor is not protected under certain laws, including antidiscrimination, minimum wage, overtime and unemployment compensation, and may not receive Social Security credit.

An employee is not responsible for withholding or paying payroll taxes. If the IRS finds a dentist treated as a contractor was in fact an employee, the guide says the employer may be liable for failure to withhold payroll taxes and for penalties.

Your tax adviser can explain how this affects a specific dentist. Do not decide on the label alone.

What can go wrong if status is unclear?

The ADA lists four open questions that an unclear agreement can leave:

• Whether you are liable for remitting your own state and federal taxes.
• Which expenses reduce your net pay.
• Whether you receive paid vacation, sick or personal days.
• Whether you book and bill your own patients.

The ADA says an attorney “can help you avoid big troubles with the IRS and potential disagreements with practice owners and colleagues.” Contractor arrangements also change other terms, such as malpractice insurance and who keeps patient records. The ADA contract guide raises both as questions to settle in writing.

Questions to bring to your attorney and CPA

1. Does the actual day-to-day work match the status the contract states?
2. Who sets the dentist’s schedule, fees and treatment decisions?
3. Who keeps the patient records after the job ends?
4. Which insurance does the dentist buy, and which does the practice carry?
5. How would pay and taxes change under each status?
6. Which clauses, such as a non-compete, apply under each status?

For clause-by-clause detail, see employment agreement provisions and compensation models.

Next step

The dental associate contracts guide puts worker status next to the other contract terms. To discuss a related project, contact Dr. Copeland about consulting.