Are You Misclassifying Nurses or NPs as 1099 Contractors?

Hiring nurses or NPs as 1099s? That "cost-saving" move could expose you to massive penalties — especially in California under AB5.

In this breakdown, NP & attorney Nick Webb explains why most nurses, NPs, LVNs, and PAs cannot legally be independent contractors, what the IRS looks at in SS-8 determinations, and when W-2 or corp-to-corp is the safer, compliant option.

The Misclassification Risk

Worker classification isn't a choice — it's determined by the actual working relationship. The IRS uses factors like behavioral control, financial control, and the type of relationship to decide whether someone is an employee or an independent contractor.

Getting this wrong can trigger:

• Back payroll taxes, penalties, and interest
• State-level consequences (California's AB5 is particularly strict)
• IRS Form SS-8 determinations that reclassify workers retroactively
• Legal exposure from misclassified staff

When W-2 or Corp-to-Corp Is the Compliant Option

For most clinical staff performing core patient care under the direction of a facility, W-2 employment is the compliant classification. For true independent entities providing services, a corp-to-corp arrangement (where both parties are business entities) may be appropriate.

If you employ clinical providers, understanding these rules is essential to avoid costly mistakes, audits, and lawsuits.