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Physician Practices Can Avoid Employment Tax Overpayment with “Common Paymaster”

| March 30, 2018
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[Editor's Note: This is a guest post by Mark Huges, CPA, CFE, Partner at ShindelRock Accounting Firm. This post was placed with his permission (and suggested by him).

Many of our tax clients are physician groups where the employee (a physician or nurse, say) is dually employed by the group as well as a hospital or other related entity.   The related entities, the hospital and the physician practice, may be paying too much for the employer’s portion of employment taxes (e.g. FICA, Medicare FICA, FUTA) for those employees. A “common paymaster” arrangement could save a portion of those employment taxes.

An example might be a nurse who is a full-time employee of a hospital and also moonlights as a part-time (or even full-time) employee of a private medical practice. He/she receives two paychecks and two W-2 forms (one from each separate employer), resulting in both employers being liable for the employer’s portion of employment taxes. However, that does not have to be the case where the two employers are corporations and are related and a “common paymaster” arrangement could be beneficial, such as:

  • A radiology group practicing in a professional corporation also has a separate corporate entity for outpatient MRIs. Some of the radiologists (and sometimes even billing and other personnel) are employed both by the radiology practice corporation and by the MRI corporation.
  • An ENT group practicing in a professional corporation also has a separate related ambulatory surgery center corporation. Some of the nurses, techs and billing staff perform services as employees of both corporations.

Where two related employers that are corporations, such as the radiology practice corporation and the MRI corporation, concurrently employ the same individual, the federal government has decided that the related corporations need not pay double for the employer’s portion of employment taxes. Related corporations are able to use a “common paymaster” arrangement authorized by the Internal Revenue Code allowing one of the related corporations to designate the other related employer as the “common paymaster” for any concurrently employed employees thereby eliminating the double employment tax problem.

To ensure your group is not overpaying employment taxes and is eligible for a common paymaster set-up, please contact a ShindelRock tax professional.  Keep in mind it typically takes a payroll company some time to set these up so it is a good idea to analyze now for qualifications and setup.

About ShindelRock
ShindelRock is a Metro Detroit accounting firm offering a broad array of services to individuals and business owners, including accounting, auditing, tax, litigation support, medical practice management and business consulting.  For more than twenty years, its team of accounting professionals has been recognized for understanding the financial and management needs of physician practices and a commitment to superior client service. www.shindelrock.com

You can find out more about ShindelRock at www.shindelrock.com

Advisory services through Capital Advisory Group Advisory Services LLC and securities through United Planners Financial Services of America, a Limited Partnership. Member FINRA and SIPC. The Capital Advisory Group Advisory Services, LLC (CAG) and United Planners Financial Services are not affiliated.

The views expressed are those of the author and may not reflect the views of United Planners Financial Services nor CAG nor David Denniston. Material discussed is meant to provide general information and it is not to be construed as specific investment, tax, or legal advice. Individual needs vary & require consideration of your unique objectives & financial situation

*This listed 3rd party firm/individual are not affiliated with or employees of United Planners Financial Services. United Planners does not supervise this firm/individual and take no responsibility to monitor the information/services they provide to you.

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