I Want My Hospital to Issue Me a 1099! What Can I Do?

Spoiler: It’s not really your choice.

When we start making serious money as doctors, our tax bills skyrocket—especially if you're married to another doctor or a high-income professional.

It’s very advantageous for high W-2 earners to receive 1099 income, because it opens the door to various tax strategies—like income shifting or creating business deductions—to lower the overall tax bill.

That’s where the 1099 vs. W-2 question comes up.

“I want my hospital to issue me a 1099, not a W-2” is a common wishful statement I hear.

In reality, whether a worker receives a 1099 or W-2 is not up to the worker’s preference - it’s determined by IRS guidelines.

No employer wants to get in trouble with the IRS, so they’re required to follow these rules—often more conservatively than needed. If the IRS determines that a worker is misclassified as an independent contractor, they can go after the employer for back Social Security, Medicare, and unemployment taxes, as well as for benefits that an employee would typically receive.

In this article, I’ll explain how the IRS examines the relationship between a business and a worker.

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The 20-Factor Test

The IRS uses a 20-factor test to evaluate whether someone is an employee or an independent contractor.

The key word here is control—who has it? (My wife does. Lol.)

Here’s a summary of the 20 factors:

1. Instructions to worker

   1. If the hospital tells you when to show up, where to be, and how to treat patients, that’s W-2 territory.

      1. Example: Hospital requires you to use their EMR system, follow their protocols for every patient interaction, and take call on a set schedule.

2. Training

   1. If the hospital trains you on how to document, handle workflows, or attend regular orientation, that’s a sign of control = employee.

      1. Example: You’re required to attend monthly provider meetings or compliance training run by hospital staff.

3. Integration into business operations

   1. If your services are part of the hospital’s core operation (and they couldn’t function without you), they probably consider you an employee.

      1. Example: You’re one of two full-time hospitalists covering the inpatient floor year-round.

4. Requirement that services be rendered personally

   1. If the hospital expects you specifically to show up and treat patients, that suggests control.

      1. Example: You can’t send a locums doc in your place on days you don’t feel like working.

5. Hiring, supervising, and paying assistants

   1. If the hospital assigns nurses or MAs to you and pays them, you’re part of their staffing system => employee.

      1. Example: Hospital assigns you a scribe and clinical assistant and covers their payroll.

6. Continuity of the relationship

   1. Long-term, ongoing work (especially full-time) is more likely to be an employee relationship.

      1. Example: You’ve been working 40 hours a week for the hospital for the last three years.

7. Setting the hours of work

   1. If the hospital sets your shifts or clinic hours, they control your time => employee

      1. Example: “You’re on from 8am–5pm, Monday through Friday. No exceptions.”

8. Requirement of full-time work

   1. If the hospital requires full-time availability and limits you from working elsewhere, that’s control.

      1. Example: You’re told not to moonlight or work at other hospitals during your employment.

9. Working on employer premises

   1. If you have to work onsite (when your job could be done elsewhere), that suggests employment.

      1. Example: You’re required to chart only in the hospital’s EMR while onsite (wouldn’t that be terrible in 2025?)

10. Setting the order or sequence of work

    1. If the hospital dictates the order of tasks—what to do, when to do it—that’s control.

       1. Example: Hospital requires you to round in a specific order, prioritize certain consults first.

11. Requiring oral or written reports

    1. Frequent reporting to supervisors? => employee

       1. Example: You’re required to submit daily patient counts to the medical director.

12. Paying worker by the hour, week, or month

    1. Getting paid hourly or on a regular schedule, regardless of productivity => employee

       1. Example: You’re paid $150/hour every two weeks whether you see 5 or 25 patients per shift.

13. Payment of worker's business/travel expenses

    1. If the hospital reimburses your expenses (like mileage, CME, or licensing), that’s more employee-like.

       1. Example: Hospital pays for your medical license renewal and reimburses mileage between facilities.

14. Furnishing tools and materials

    1. If you use the hospital’s supplies, office space, computers, and medical tools, you probably work for them as an employee.

       1. Example: You use the hospital’s laptop, scrubs, and exam room supplies—none of your own gear.

15. Significant investment by the worker

    1. Independent contractors typically buy their own gear or space.

       1. Example: You lease your own clinic space, hire your own staff, and bill insurance independently = contractor

16. Realization of profit or loss by the worker

    1. Can you make or lose money based on how you run your practice? That’s a contractor.

       1. Example: You run your own concierge clinic—if you don't fill your panel, you lose money. If you do, you profit.

17. Working for more than one business at a time

    1. If you see patients at multiple hospitals or practices, you are likely a contractor.

       1. Example: You do per diem shifts at three hospitals—none of them restrict your other work.

18. Availability of services to the public

    1. Independent contractors often market themselves directly.

       1. Example: You have a website, business cards, and see patients independently. Not typical for hospital-employed docs.

19. Firm’s right to discharge the worker

    1. If the hospital can fire you at will, that’s an employer-employee relationship.

       1. Example: Your hospital tells you, “Your services are no longer needed,” effective immediately. => employee

20. Worker’s right to terminate the relationship

    1. If you can walk away without liability, that suggests employment.

       1. Example: You give 2 weeks’ notice and leave. If you had a contractor agreement, you might owe penalties for early termination.

Not all 20 factors apply in every case. The IRS uses a “facts and circumstances” approach, weighing factors based on relevance and context.

The general principle?

• The more control the business has, the more likely the worker is an employee.

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Final Thoughts

The IRS doesn’t care whether you want to be 1099. They care about how the relationship actually works.

If the hospital controls when you work, how you work, and pays you on a regular basis using their tools, you're almost certainly an employee. You’ll get a W-2, not a 1099—and that means very limited tax deductions, less flexibility, but more stability and benefits.

But if you're moonlighting, consulting, or doing locums with minimal oversight? That could be legit 1099 territory—and that’s where the tax strategies kick in.

Just make sure it’s all structured the right way.

Reference:
IRS Publication 1779 – Independent Contractor or Employee

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