You're looking for work and as you scroll through job sites, you see positions that are listed as either PRN or Independent Contract work. While they may seem interchangeable on the surface, there are important distinctions that are often confusing to understand. Here is a quick breakdown of the major differences between the two.
Let's Start With The Definitions...
PRN is an abbreviation for the Latin term, pro re nata, or "as the situation demands". Healthcare simply can't stop when employees call out sick or demand increases, so most settings maintain a back-up pool of providers to come in when regular staffers can't fill the gap. This is when PRN employees are called in to work. PRN differs from traditional employment in that hours are typically not guaranteed and you will most likely not qualify for any of the benefits that a traditional employee is granted. As an employee, the employer retains behavioral control of the work (a hallmark distinction between PRN and 1099 work) so you may be called in to fill those gaps at some of the er..., less convenient shifts such as nights, weekends or holidays. To become a PRN employee, you will need to submit a W-4 form and the employer will pay taxes on the amount earned and will also be responsible to absorb the expense of supplies or equipment that you need to perform your work.
Independent Contract Work, on the other hand, is not employment, but a Contract Agreement between you (or your company) and another person or entity to perform services. The Contract must define the duties, pay, amount and type of work and typically a lot of other information especially if the company you are contracting with is billing a federal payor such as Medicare or Medicaid. When you are hired as an independent contractor, no taxes are. paid on your behalf. Instead, the employer gives you a 1099 which states the earnings you made that year. FYI, the employer only has to report earnings more than $600.00 whereas you need to report earnings > $400.00. You then need to pay taxes on those earnings.
Um.... why would I want to pay the taxes?
Great question! First off, as they say, "the only two things that are certain in life are death and taxes". You are always paying the taxes from your income; it's just a matter of who is responsible to pay. When you are an employee, the employer pays the taxes on your behalf. As a 1099, you pay the taxes. As a result, you can expect that you will earn more (a lot more actually) to cover this expense. Independent Contractors typically earn 20-30% more than employees in order to offset this tax liability. If that is all you do (just pay taxes), then you can assume that your take-home pay is probably equal to that of a PRN Employee.
Where things start to look a bit brighter, is when you start to claim your deductions.
The first (and a biggie) is that you only pay Self Employment Tax on your Net Earnings (Gross Earnings - Deductions = Net Earnings). And, the IRS considers half of your tax (the employer half) to be deductible. So your taxable amount already starts to be lowered once you claim this expense. But that's just the start. When you work in a contract position, every business-related expense can be claimed as a tax deduction. That's right. Your mileage to/from the work site, your cell phone (when used for work calls) your supplies and everything else you do to perform the work can also be claimed as a tax deduction. This then adds up to extra pay that goes in your pocket instead of an employer.