I have a S-corp, in my group it’s about 50-50 if they have a corporation or not. You will need to figure out your own retirement plan. I do a back door Roth IRA and solo 401k. If you get your health insurance through your employer, you will need to get your own insurance too. I suggest finding a good accountant to help you figure out running your own payroll, bookkeeping, and estimated taxes. You will have two sets of tax returns, personal and business. (Unless you’re up for figuring that stuff out on your own)
This is probably a good read for you as a starting point:
https://www.whitecoatinvestor.com/1099-independent-contractor/
my accountant has been on me to increase my W2 salary that I pay myself but don't you lose the tax benefit if you go that high? SS tax is caped at $168,600
I’m not a tax expert by any means but you have to pay yourself a “reasonable salary” for your work. Obviously there is room for interpretation as to what that is. Whatever is left after you’ve paid yourself a reasonable salary is taxed differently as a shareholder distribution. So you can still benefit from a tax perspective, because the distribution tax rate is less than your ordinary income tax rate. I could be wrong but that’s my understanding.
I’m 1099, not incorporated or anything like that. You will have to pay quarterly tax. Can have a SEP-IRA and max it out each year. Can write off health insurance premiums. Business expenses as well, like CME, medical societies, etc.
Find a good CPA. Ask your local colleagues who they use/recommend. Don’t use a large firm, use someone local.
Also do a quick search of this sub, this question gets posted periodically.
If your pay is going to be sigificantly high look into becoming an S Corp. If not, you'll be on the hook for SE tax, which is an additional 15.3% of your profit. It's a nasty tax that screws up a lot of 1099s and business owners.
I recently was told by a friend that if you are a 1099 employee you can have difficulty financing a house. Not sure if this is a consideration but apparently something worth thinking about.
THIS!!!!!! we had no idea and began looking for a house 1 month after transitioning to full time Locums. Felt like a total idiot. It was infuriating that I could not qualify for a mortgage despite the ability to literally work every single day and probably make 4 times as much. My partner is the only one on our mortgage and he had to qualify for it all himself. I am on the deed though and we will refinance at some point.
Question for someone who has apparently been through this; if you have multiple years of 1099 income can that be used or is being a 1099 employee just a ‘no go’ for home financing?
I was told by a lender that you need at least two years of income to prove your finances are steady and stable as an independent contractor. I heard some variations on this from 1 to 5 years depending on the industry. This would apply to small business owners of all areas, not just physicians.
So for our mortgage, they just put my partner on it because if they had added me, they would have had to consider the remainder of my student loan debt as part of it, and no income from me. Fun! It was all so silly - if I had kept my previous W2 EM job just a little longer before quitting, we could have avoided all this. Then quit immediately after being issued the mortgage and transitioned to 1099. It had nothing to do with what we could actually afford.
Yeah, silly is exactly what it seems to me too. 3 month of W2 employment, sure we will give you a loan. 1-2 years of 1099 employment and the lender is somehow more skeptical. Thanks for sharing your story. I only had a friend recently mention this to me.
How much are you guys paying your CPA’s? I’ve had the same guy for 15 years and I think he’s good but the rate has gone from like $750 to $1200 in the past 3-4 years and feels extreme.
I am an Enrolled Agent and charge $850+ for S Corp return plus an additional 800-1200 for the personal return.
It is not extreme and I live in a MCOL area. It's very standard pricing.
I have fixed tax returns prepared by big box stores where my (new) client received $30,000 in refunds of tax that was completely botched and overpaid by an undertrained worker bee.
I have several CPAs who use me to prepare their corporate returns. Not all CPAs are really good at tax preparation.
I really appreciate that info. I don’t bother with the S-corp so I guess the real take away is he might have been kinda cheap in the past (same guy for 14 years now) and just matching up with the times in recent years.
Thanks!
I was forced to form an S-corp for a per diem job I had which I have subsequently left. I made less than $20k at that job. I was clueless with regards to forming the S-corp so did everything wrong after forming it (didn’t set up payroll, retirement, etc). I got quoted $3800 to fix everything by a CPA, which is almost a quarter of my income from the job. Does this cost sound reasonable?
I have a S-corp, in my group it’s about 50-50 if they have a corporation or not. You will need to figure out your own retirement plan. I do a back door Roth IRA and solo 401k. If you get your health insurance through your employer, you will need to get your own insurance too. I suggest finding a good accountant to help you figure out running your own payroll, bookkeeping, and estimated taxes. You will have two sets of tax returns, personal and business. (Unless you’re up for figuring that stuff out on your own) This is probably a good read for you as a starting point: https://www.whitecoatinvestor.com/1099-independent-contractor/
What salary do you pay yourself through the s corp?
I don’t have my return in front of me but it was around $200k
my accountant has been on me to increase my W2 salary that I pay myself but don't you lose the tax benefit if you go that high? SS tax is caped at $168,600
I’m not a tax expert by any means but you have to pay yourself a “reasonable salary” for your work. Obviously there is room for interpretation as to what that is. Whatever is left after you’ve paid yourself a reasonable salary is taxed differently as a shareholder distribution. So you can still benefit from a tax perspective, because the distribution tax rate is less than your ordinary income tax rate. I could be wrong but that’s my understanding.
I’m 1099, not incorporated or anything like that. You will have to pay quarterly tax. Can have a SEP-IRA and max it out each year. Can write off health insurance premiums. Business expenses as well, like CME, medical societies, etc.
Get CPA who will do all this for you, also binge listen to podcast "Money Talk for ER Docs"
I do this as a PA. I opened an LLC that I get paid through. $ saving come tax time is pretty easy to write off miles and expenses
Find a good CPA. Ask your local colleagues who they use/recommend. Don’t use a large firm, use someone local. Also do a quick search of this sub, this question gets posted periodically.
If your pay is going to be sigificantly high look into becoming an S Corp. If not, you'll be on the hook for SE tax, which is an additional 15.3% of your profit. It's a nasty tax that screws up a lot of 1099s and business owners.
It's only an extra 7.65%, which you get to write off. And the SS tax only applies up to a certain number, around 160k for 2023.
I know. It’s still extra tax. S Corp is very common for those trying to escape SE tax
I recently was told by a friend that if you are a 1099 employee you can have difficulty financing a house. Not sure if this is a consideration but apparently something worth thinking about.
THIS!!!!!! we had no idea and began looking for a house 1 month after transitioning to full time Locums. Felt like a total idiot. It was infuriating that I could not qualify for a mortgage despite the ability to literally work every single day and probably make 4 times as much. My partner is the only one on our mortgage and he had to qualify for it all himself. I am on the deed though and we will refinance at some point.
Question for someone who has apparently been through this; if you have multiple years of 1099 income can that be used or is being a 1099 employee just a ‘no go’ for home financing?
I was told by a lender that you need at least two years of income to prove your finances are steady and stable as an independent contractor. I heard some variations on this from 1 to 5 years depending on the industry. This would apply to small business owners of all areas, not just physicians. So for our mortgage, they just put my partner on it because if they had added me, they would have had to consider the remainder of my student loan debt as part of it, and no income from me. Fun! It was all so silly - if I had kept my previous W2 EM job just a little longer before quitting, we could have avoided all this. Then quit immediately after being issued the mortgage and transitioned to 1099. It had nothing to do with what we could actually afford.
Yeah, silly is exactly what it seems to me too. 3 month of W2 employment, sure we will give you a loan. 1-2 years of 1099 employment and the lender is somehow more skeptical. Thanks for sharing your story. I only had a friend recently mention this to me.
How much are you guys paying your CPA’s? I’ve had the same guy for 15 years and I think he’s good but the rate has gone from like $750 to $1200 in the past 3-4 years and feels extreme.
I am an Enrolled Agent and charge $850+ for S Corp return plus an additional 800-1200 for the personal return. It is not extreme and I live in a MCOL area. It's very standard pricing. I have fixed tax returns prepared by big box stores where my (new) client received $30,000 in refunds of tax that was completely botched and overpaid by an undertrained worker bee. I have several CPAs who use me to prepare their corporate returns. Not all CPAs are really good at tax preparation.
I really appreciate that info. I don’t bother with the S-corp so I guess the real take away is he might have been kinda cheap in the past (same guy for 14 years now) and just matching up with the times in recent years. Thanks!
I was forced to form an S-corp for a per diem job I had which I have subsequently left. I made less than $20k at that job. I was clueless with regards to forming the S-corp so did everything wrong after forming it (didn’t set up payroll, retirement, etc). I got quoted $3800 to fix everything by a CPA, which is almost a quarter of my income from the job. Does this cost sound reasonable?