In short

Payroll for medical practices covers a mix of salaried providers, hourly clinical and front-office staff, and sometimes per-diem or contract clinicians. The work includes correct overtime for non-exempt staff, classification of contractors versus employees, retirement plan deferrals, benefits deductions, quarterly Form 941 filings and year-end W-2s, with payroll journal entries posted to the books each period.

Mixed workforces

A typical practice employs salaried physicians or advanced practitioners, hourly nurses and medical assistants, and front-office staff, and may also use locum or per-diem clinicians. Each group needs the right setup in payroll:

  • Non-exempt staff must be paid overtime under the Fair Labor Standards Act when they work more than 40 hours in a workweek
  • Contract clinicians should be reviewed against the IRS employee versus independent contractor factors before being paid on a Form 1099
  • Owner-physicians in an S corporation receive wages through payroll as well as any distributions

Deposits and quarterly filings

Federal income tax withheld and Social Security and Medicare taxes are deposited on the schedule described in Publication 15 and reported quarterly on Form 941. We reconcile each 941 to the payroll register and the books before it is filed.

Benefits and deferrals

Health insurance premiums, retirement plan deferrals and other deductions are set up with the correct pre-tax or after-tax treatment, and employer contributions are posted to the right expense accounts.

Year end

W-2s are reconciled to the four quarterly 941s before they are issued, which is where most payroll errors are caught.

Before we start

We review provider compensation agreements and any productivity bonus formulas.

Key terms

Definitions for terms used on this page:

  • Payroll Register: A payroll register is a report listing each employee's earnings, deductions and net pay for a payroll period.

Medical Practices problems this addresses

  • Insurance payments arrive weeks after the visit and rarely equal the billed charge
  • Contractual adjustments and write-offs get mixed up with true bad debt
  • Practice-management reports and the bank deposits never seem to agree
  • Provider compensation formulas depend on collections that are hard to measure
  • Equipment purchases and leases are large and need consistent treatment