From the desk of STAC Bizness Solutions CEO, Shawna Aho

As a dental practice owner, building the right team is critical to both the quality of patient care and the smooth operation of your practice. But there’s a key decision that many practice owners overlook… and it can have serious financial and legal implications.

That decision is how to classify the people you hire: are they employees or independent contractors?

The distinction affects everything from taxes and benefits to how much control you have over a person’s work. Misclassifying a worker can lead to IRS penalties, back taxes, and even legal action. In this article, we’ll explore what separates an employee from a contractor, how the IRS defines each, what the pros and cons are, and how STAC Bizness Solutions can help dental practices make the right call.

Understanding the Difference

The biggest factor in determining whether someone is an employee or an independent contractor is the degree of control you have over their work.

Employees are generally under your direction. You set their schedule, provide tools and materials, supervise their work, and expect them to follow your policies and procedures. They’re typically part of your long-term team and contribute directly to the core services of your practice.

Independent contractors, on the other hand, operate with more autonomy. They often set their own hours, use their own equipment, and determine how the work gets done. You may define the desired result, but not how it’s achieved. Contractors are usually brought in for specific projects or temporary assignments.

In a dental practice, a full-time dental assistant or hygienist is almost always an employee. A freelance marketing consultant or a temporary hygienist hired through an agency could be a legitimate independent contractor.

What the IRS Looks At

The IRS uses three broad areas to determine how a worker should be classified:

1. behavioral control,
2. financial control, and
3. the nature of the relationship.

If you control how and when the person works, they’re likely an employee. If the worker is financially dependent on your practice, uses your tools, or is paid regularly rather than by the project, that also leans toward employee classification. The relationship test considers whether the work is ongoing, integral to your practice, or includes benefits such as vacation or insurance, all signs of employment.

One common mistake is assuming that a contract determines classification. But in the eyes of the IRS, the actual day-to-day relationship is what counts. If a person is treated like an employee, no contract or 1099 form will change that reality.

Why It Matters to Your Practice

Getting classification right is about more than avoiding penalties, it’s about protecting your practice and building a reliable team.

When you hire employees, you gain stability and control. You can train them, supervise their work, and integrate them into your practice’s culture. Patients benefit from consistent care, and your office can run more smoothly. But you also take on responsibilities like payroll tax withholding, benefits administration, and compliance with labor laws.

Independent contractors can reduce overhead costs. You don’t have to provide benefits, manage payroll deductions, or worry about overtime rules. This can be especially useful when you’re hiring someone for a short-term role or a specialized skill set.

However, that flexibility comes at the cost of control. You can’t dictate how a contractor completes their work. And relying too heavily on contractors for essential functions, like hygiene or chairside assistance, can put your practice at risk if the relationship doesn’t comply with IRS standards.

The Risk of Misclassification

Misclassifying an employee as an independent contractor can trigger serious consequences. The IRS may require you to pay back taxes, including unpaid Social Security and Medicare contributions, along with penalties and interest.

In addition to federal consequences, you could face issues with your state labor department. A misclassified worker may also file a claim for unpaid benefits or overtime wages. These claims are often successful if the classification was incorrect.

The reputational cost can also be significant. If a former team member speaks out publicly or files a complaint, it can harm staff morale and patient trust.

For example, a practice may classify a hygienist working three days a week as a contractor to avoid payroll taxes. But if that person uses your tools, follows your policies, and has been with you for months or years, the IRS may see them as an employee — regardless of how you labeled the relationship.

Many practice owners unintentionally blur the lines when they hire. A few common misconceptions include:

• Assuming part-time workers can automatically be classified as contractors. It’s not about hours — it’s about control.
• Believing a signed agreement is enough. Even with a contractor agreement, the IRS may reclassify a worker based on how the relationship actually functions.
• Following industry trends or local norms. Just because other practices classify a certain role one way doesn’t mean it’s correct or compliant.

These misunderstandings can lead well-meaning practice owners into costly territory.

A Look at Real-World Scenarios

Front Desk Assistant: Consider the case of a front desk assistant who works two days a week and uses your software to check patients in and out. They follow your office policies and report to your office manager. Even with limited hours, this person is most likely an employee — and should be classified as such.

Marketing Consultant: Now consider a marketing consultant hired to revamp your website. They work remotely, use their own tools, invoice monthly, and deliver specific results without direction on how to do the work. This individual fits the contractor model.

Temp Hygienists: Temporary hygienists brought in through a staffing agency often fall into a gray area. In most cases, they are employees of the agency, not yours, but you should still ensure the arrangement is clearly defined and documented.

How STAC Bizness Solutions Can Help

At STAC Bizness Solutions, we specialize in working with dental practices to ensure compliance and help you manage your team with confidence. We understand the day-to-day demands of running a dental office and the challenges that come with staffing and classification.

Our team can review your current staffing structure, identify potential misclassification risks, and help you set up payroll systems that keep you compliant. We’ll walk you through each hire and provide ongoing guidance as your practice grows and changes.

The truth is, there’s no one-size-fits-all answer. Every hire is different and every practice has unique needs. With STAC Bizness Solutions by your side, you can make smart decisions that protect your business, support your team, and help your practice thrive.

Unsure about a worker’s classification? Let’s talk. We’ll help you make the right call and stay focused on patient care, not paperwork. Call us at 844-424-9637.