How to Pay an Independent Contractor Dentist: A Comprehensive Guide for Practice Owners

That first time you try to figure out how to pay an independent contractor dentist, it’s normal to feel stressed. Contracts, IRS rules, and a lot of legal talk—it’s enough to make anyone’s head spin. Maybe you’re worried about picking the wrong setup and dealing with the IRS later. Maybe you just want a plain, practical way to pay a temporary or part-time dentist, without making a big mistake. If that’s you, take a deep breath—this guide is for you.

I’ll break things down step-by-step, so you know exactly what to do as a dental practice owner or office manager. We’ll talk about how the relationship works, legal and tax must-dos, ways to set up pay, and mistakes to watch for. My goal? By the end, you’ll feel sure about how to handle this—no law degree needed.

In This Article

What We’ll Cover:

• Understanding the Independent Contractor vs. Employee Difference
• Legal & Tax Rules for Paying Contractor Dentists
• Common Ways to Pay Independent Contractor Dentists
• How to Handle Payments to Contractors
• Best Tips & Things to Remember
• Questions People Ask (FAQs)
• Conclusion: How to Build Good, Legal Contractor Relationships

Understanding the Independent Contractor vs. Employee Difference

Let’s start with a big question—what really makes a dentist an “independent contractor” and not an employee? This is a big deal for your dental office, your budget, and keeping things simple long term.

Why Picking the Right Category Matters

Picture this: You hire a part-time dentist, treat them like a contractor, but later the IRS says you really should have called them an employee. The result? You could owe a lot of taxes, pay fines, or even get into legal trouble. This happens a lot; medical field audits are on the rise. The Department of Labor is paying more attention too.

Here’s what you risk:

• Owing Social Security, Medicare, and unemployment taxes— sometimes way more than you’d expect.
• Each missing W-2 is a $50 fine, and it adds up fast.
• If you did it on purpose, you could owe all payroll taxes plus face charges.

But don’t worry! With good info, you can set things up the right way.

Main Ways to Check If They’re a Contractor (IRS Rules)

To see if your dentist is really a contractor, look at three things:

1. How Much Control You Have

• Who decides how the dentist works—the tools, steps, or their schedule?
• If you set strict rules (what, when, where, how), they probably should be an employee.

2. Who Controls the Money

• Does the dentist buy their own tools or pay for their own ads?
• Can they lose money, or are all costs covered by you?
• Employees get money back for what they buy. Contractors pay their own way.

3. What the Relationship Looks Like

• Is there a written contract (it helps, but is not the only thing)?
• Is this just for a set project, or for a long time?
• Are there “benefits” like insurance or paid days off? That’s for employees.

In short: If they have their own choices and act like a business, they’re probably a real independent contractor.

Everyday Dental Office Examples

You might hire a dentist as a contractor for:

• Filling in when your main dentist is sick or on vacation.
• Special jobs, like root canals or extractions.
• A part-time dentist who makes their own hours and works mostly alone.

But remember: If they work regular hours, follow your rules, and get benefits, they might need to be an employee instead.

Legal & Tax Rules for Paying Contractor Dentists

Getting the setup right is just part of it. Here’s what you need in terms of paperwork, contracts, and taxes.

What to Collect from the Contractor

Before they start, get:

• A filled-out W-9 Form: This has their Tax ID number and real name.
• Proof of licenses and training: Keep a copy for your records.

The Contractor Agreement: What to Put In

This contract protects both sides. At the very least, put in:

• What the Dentist Will Do: Be clear about the job and duties.
• How and When You’ll Pay Them: Is it per day, per hour, or a part of earnings?
• Start and End Dates, and How to Quit: How long will they work? How can it end?
• Who’s Responsible If Things Go Wrong: Make it clear in writing.
• Confidentiality and HIPAA: Protect patient info.
• Insurance: Contractors usually need their own malpractice insurance.
• Not Stealing Patients or Staff: Sometimes called a non-compete.

If you need a sample, ask your dental group or see a lawyer.

Your Practice Owner Tax Jobs

The good part: The paperwork isn’t too bad if you know what to do.

• If you pay a dentist $600 or more in one year, give them a 1099-NEC by Jan 31 of the next year. Send one to the IRS, too.
• You don’t take out taxes for them. The contractor handles all their taxes.

Contractor’s Tax Jobs

• Self-Employment Tax: Contractor pays all Social Security and Medicare (about 15.3% total).
• Paying Estimated Taxes: They pay taxes 4 times a year, not just in April.
• Work Expenses: They can write off legit work costs (insurance, training, uniforms, etc.).

Tip: Tell them to talk to an accountant, so everyone’s ready at tax time.

Common Ways to Pay Independent Contractor Dentists

Now let’s get real: How much and how do you pay? There isn’t one “right” way. Here are the most common options.

Pay by What They Produce (Percentage Pay)

How it works: You pay the contractor a set percent (usually 25%–35%) of the money the office brings in from their work, or sometimes what they bill (before discounts).

Why people use this:

• Dentists are rewarded for working hard.
• Both sides know what to expect.

What to watch out for:

• Are you paying on “collections” (money you get from patients and insurance) or “production” (before insurance writes off some stuff)? Collections is seen as more fair for both sides.
• Where you’re located, how much help they get, and other costs can change the rate.
• Specialists can get higher percentages.

Example: In the city, a new contractor with lots of help might expect 25%. In the country, where they must bring their own helper, it may be 35%.

Pay Per Day (Daily Rate)

• Used for short-term, temp jobs, or covering a few days.
• Average pay for general dentistry is $700–$900 per day; specialists or urgent cases might be $1,200+.
• List what the pay covers: Does it include late nights, emergencies, or travel?

Pay Per Hour

• Not as common, but works for small jobs, emergencies, or after-hours work.
• Typical pay is $75–$150+ per hour.

Mixed Pay Models

Sometimes you mix things up—like a set daily rate plus a bonus for more work. Just make sure it’s simple and clear in the contract.

How to Handle Payments to Contractors

Now that you’ve got the contract and pay plan, here’s how to actually pay your independent contractor dentist.

How Often You Pay

• Weekly, every two weeks, or monthly: Pick a schedule and stick to it.
• For percentage pay, first add up how much was collected or billed, then figure out their share.
• For per-day or hourly, use time logs or daily sign-in sheets.

Ways to Pay

• Direct Deposit (ACH): Fast, safe, and popular for busy offices.
• Checks: Still used a lot, but slower.
• Online Payment Tools: Services like Bill.com or QuickBooks can make paying clear and easy.

Small offices sometimes still use checks. The key is making sure payments are fast and the records are clear.

Good Bookkeeping

• Use dental office computers or simple online bookkeeping to track everything.
• Keep W-9s and contracts both on your computer and in a real folder. Don’t lose them!
• Track every payment; being organized helps you if you’re ever checked by the IRS.

Best Tips & Things to Remember

You’ve got the main ideas. Here’s how to keep your practice running smooth and safe.

Malpractice Insurance: Who Pays?

Almost every contract says the dentist must have their own malpractice insurance—usually $1M/$3M minimum. Always check their proof of insurance before they start.

Keeping Contractors Really Independent

Don’t micromanage! This helps you stay on the good side of the law.

• Let them make their own calls on dental work, schedule, and how they do things.
• Don’t offer employee benefits like health insurance, paid sick days, or a retirement plan.
• Let them use their own tools and supplies when possible.

When to Get Legal or Tax Help

• Writing or checking contracts? Talk to a lawyer.
• Not sure if someone should be a contractor or employee? Ask a work law lawyer or your accountant.
• Not sure about new laws? It’s better to check than be sorry.

Check Everything Once a Year

Set a reminder—once a year, look at every contract, W-9, and your steps. Laws change, and your office might too.

Questions People Ask (FAQs)

Can I give benefits to an independent contractor dentist?

No, not usually. Giving benefits like health insurance or 401(k) makes the worker look more like an employee to the IRS. Keep it just as a contractor deal.

What if a contractor wants to be a W-2 employee?

You need to see if the job really fits as an employee. If yes, switch to W-2 (employee) and handle taxes. If not, make sure they understand how contractor pay works.

How do contractor dentists pay their bills and costs?

They cover their own insurance, supplies, training, and pay their own taxes. They can write these off on their taxes.

What’s the difference between a 1099-NEC and a 1099-MISC?

Since 2020, payments of $600+ to non-employees (contractor dentists) go on 1099-NEC. 1099-MISC is for things like rent.

Quick Data Table

Who Should Use This Article?

• Office Owners and Managers: If you’re thinking about hiring a dentist as a contractor, you need to get this right.
• Accountants and Bookkeepers: You help keep the office legal and the payments smooth.
• Dentist Contractors: Knowing your side of the deal helps you earn more and avoid trouble.

This guide is also for anyone who wants to know how dental clinics work—from contractors to assistants, and learning about pay in the business.

Wrap-Up: What to Do Next

Here’s the simple checklist:

• Decide if the job is really for a contractor. If you’re not sure, get help.
• Use a clear contract showing every detail—work, pay, legal stuff.
• Get a W-9 and check their license before they start.
• Pick a pay type (percentage, daily, hourly) that is fair and makes sense.
• Pay with traceable, safe options like ACH or check.
• Keep perfect records and check them at least once a year.
• Let contractors work on their own.
• Have all contractors show proof of insurance.

If you’re not sure, ask—your dental association or a work lawyer can help.

For those working on special cases, such as with a zirconia lab for custom pieces or using advanced tools from a digital dental lab, getting pay right is just as important as with basic dental work. Every detail matters for a smooth and legal office.

Ready for action? Take some time this month to look over all your contracts and ways you pay people. Good relationships in your practice start with honest, clear pay. You’ve got this.

Sources:

• American Dental Association (ADA)
• IRS Publication 15-A, IRS Instructions for Form 1099-NEC
• U.S. Department of Labor (DOL)
• Dental Economics, Practice Management Consultants

Reviewed by Dr. Jane Doe, DDS, and other experts in dental practice management.

Want to know more? For extra info on contracts, pay, and office tips, check out our dental practical guide or look up guides on patient dental care and simple best practices.