Practice finances · Guide
Hiring Help for Your PT Practice: The Tax Side of Growing Your Team
What to set up before your first hire, how employees and contractors differ, and how to keep records clean from day one.
Bringing people into your practice is a milestone. Whether it's a front desk coordinator, another therapist, or a billing specialist, hiring means the practice is growing. It also comes with tax and administrative responsibilities. Knowing them ahead of time helps you onboard people correctly from day one.
Employee or independent contractor?
The first question is how the person should be classified. It's not a paperwork preference. It depends on the working relationship. Generally, if you control how, when, and where the work is done, the person is likely an employee. If they work independently, set their own schedule, and serve other clients, they may be a contractor. The IRS looks at several factors together, and we can help you apply them to your situation.
Hiring an employee: what to set up
- An Employer Identification Number (EIN), if you don't already have one
- A payroll system to handle withholding, deposits, and filings
- State payroll tax and unemployment insurance registration (requirements vary by state)
- Workers' compensation coverage (required in most states)
- New hire reporting to your state agency
- Forms W-4 and I-9 completed at hire
Payroll involves withholding federal and state income tax, Social Security, and Medicare from each paycheck, and paying the employer's matching share of Social Security and Medicare on top. Employers also file quarterly payroll returns (Form 941), an annual federal unemployment return (Form 940), and issue W-2s by January 31.
Working with a contractor: what to keep in mind
You don't withhold taxes for a contractor. They are responsible for their own. Your main obligations are to collect a Form W-9 before the first payment and to issue a Form 1099-NEC to any contractor you pay $2,000 or more in 2026. That threshold was $600 in earlier years, and it's expected to be indexed for inflation in the future.
Keep clear records of what you pay each contractor through the year, so the January filing is simple and accurate.
Key takeaway
Collect the W-9 at the start, not in January. It's the single easiest way to keep contractor reporting stress-free.
Deducting what you pay
Wages, employer payroll taxes, and benefits you provide are deductible business expenses. So are payments to contractors for work that's ordinary and necessary for the practice.
Plan ahead
Hiring also changes other parts of your tax picture. Adding employees affects which retirement plans are available, how your books and reports should be organized, and how much cash you need to carry for payroll. Talking it through before the first offer goes out is the easiest time to get it all set up well.
Want this applied to your numbers?
We help set up payroll, contractor records, and year-end filings so growth stays simple. Book a 30-minute call and we'll look at your situation together.
Book a 30-minute callThis guide is general information, not individualized tax or legal advice. Rules change and your situation may differ. Talk to a qualified professional before acting. Figures reflect 2026 rules at the time of writing.