1099 vs. W-2

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BLADEMDA said:
You do realize that any salary paid to a spouse as an employee is fully taxable both in terms of FICA and Federal? You get to deduct for the 401K portion of her salary but that's it. The real perks are being able to deduct auto, phone, defined benefit plan, etc for the spouse. A reasonable salary for the spouse to act as a secretary or assistant has passed many audits from the IRS. Define reasonable? $28,000? $35,000? $50,000?

Home office, Auto, Malpractice, Retirement plans are the biggest perks of 1099.
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I paid spouse 20k as “salary” for admin work. Per 401k rules. They were allowed to deduct the then max 17-18k (it’s 21k this year) plus 25% of their salary ($5k). So total put into their solo 401k was 22k ish each year.

I don’t know why people are up in arms about this. It’s 100% legit. A 20k salary

1. They get Medicare credits for each year to be on the pay roll (a lot of stay at home parents need a min of 10 Medicare working year credits to qualify for full Medicare benefits at age 65). Many people do not realize this

2. And they do get taxed on the fica and Medicare portion of their salary.

I put around 52-55k into my solo 401k account pretax. So combined we had around 75k.

On the flip side. Working for state govt previously I had a 401a, a 403b, and a 457b

Between their 9.5% match And my own pretax I was able to put 75k pretax into the govt plans.
 
Why would an anesthesiologist have a home office? Do you normally work out of your home doing anesthesia? That auto expense becomes non-existent once you can't justify doing anesthesia from your home office. Why do you have so much paperwork as an anesthesiologist to justify paying someone part time to do it for you? Would you pay someone else the same amount to do that work?
 
aneftp said:
I paid spouse 20k as “salary” for admin work. Per 401k rules. They were allowed to deduct the then max 17-18k (it’s 21k this year) plus 25% of their salary ($5k). So total put into their solo 401k was 22k ish each year.

I don’t know why people are up in arms about this. It’s 100% legit. A 20k salary

1. They get Medicare credits for each year to be on the pay roll (a lot of stay at home parents need a min of 10 Medicare working year credits to qualify for full Medicare benefits at age 65). Many people do not realize this

2. And they do get taxed on the fica and Medicare portion of their salary.

I put around 52-55k into my solo 401k account pretax. So combined we had around 75k.

On the flip side. Working for state govt previously I had a 401a, a 403b, and a 457b

Between their 9.5% match And my own pretax I was able to put 75k pretax into the govt plans.
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#1-you missed that they qualify if the spouse qualifies, same way it works for social security. So it isn't like they won't get part A if they were a stay at home spouse their entire life.
 
chessknt said:
Why would an anesthesiologist have a home office? Do you normally work out of your home doing anesthesia? That auto expense becomes non-existent once you can't justify doing anesthesia from your home office. Why do you have so much paperwork as an anesthesiologist to justify paying someone part time to do it for you? Would you pay someone else the same amount to do that work?
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Yes, I use my home office as does my my wife, to perform internet searches, research topics, print articles, book gigs, Make phone calls, send faxes (yes, I have a fax), plan my schedule, etc. MY Home office deduction is a total of $1500 per year. I don't deduct electric either. I do deduct 1/2 my internet and land based phone since I only use it for business and the fax. But, my home office allows me to deduct my auto expenses and that ranges from 50% to 80% depending on the year. I have a dedicated car for business plus other autos for personal use. Even then, I only deduct a portion of the business auto just to play it safe.

The home office deduction allows qualified taxpayers to deduct certain home expenses when they file taxes. To claim the home office deduction on their 2021 tax return, taxpayers generally must exclusively and regularly use part of their home or a separate structure on their property as their primary place of business.Jan 19, 2022

How small business owners can deduct their home office ... - IRS​


Here’s the 411 on who can deduct car expenses on their tax returns | Internal Revenue Service

Tax Reform Tax Tip 2019-100, July 29, 2019 — Taxpayers who have deducted the business use of their car on past tax returns should review whether or not they can still claim this deduction. Some taxpayers can. Some cannot.
www.irs.gov www.irs.gov
 
chessknt said:
Why would an anesthesiologist have a home office? Do you normally work out of your home doing anesthesia? That auto expense becomes non-existent once you can't justify doing anesthesia from your home office. Why do you have so much paperwork as an anesthesiologist to justify paying someone part time to do it for you? Would you pay someone else the same amount to do that work?
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When I do local gigs as a 1099, I ask my "assistant" to bring me lunch or other items. My assistant also makes sure my car is always fueled up and maintained properly. She also maintains my "case logs" for future audits and privileges at hospitals. Each case is logged by hand into my home office computer. Some days this is 20 cases or more per day. So, yes she performs necessary tasks which takes time.
 

Commissioner v. Soliman, 506 U.S. 168 (1993), was a case heard before the United States Supreme Court in which the court decided whether a portion of a dwelling unit exclusively used as a principal place of business for any trade or business of a taxpayer would allow a deduction to the taxpayer's income taxes under Internal Revenue Code Section 280A(c)(1)(A).

Soliman was an anesthesiologist who spent thirty to thirty-five hours per week with patients at three different hospitals but none of the hospitals provided him with an office. He used a spare bedroom in his house for contacting patients and surgeons, maintaining billing records, preparing for treatments, and reading medical journals.

The Supreme Court denied Soliman's home office deduction setting forth a two consideration test for whether the home was the taxpayer's principal place of business: (1) the relative importance of the activities performed, and (2) time spent at each place.

Congress's reaction to this decision was to amend Section 280A(c) in the Taxpayer Relief Act of 1997 so that a home office could meet the "principal place of business" test if it is the only fixed location where administrative or management activities are performed. This effectively nullified the Supreme Court's decision ruling in the Soliman case.
 
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chessknt said:
#1-you missed that they qualify if the spouse qualifies, same way it works for social security. So it isn't like they won't get part A if they were a stay at home spouse their entire life.
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It’s a lot more complicated when people get divorce when a spouse hasn’t worked in 20-25 years and nearing age 60. I think of all the situations. One of my colleagues got divorce age 58 and it’s complicated since his spouse didn’t work and part of divorce settlement. The soon to be ex doesn’t have enough Medicare working years. And it’s my colleague second marriage. So only one ex spouse can claim Medicare benefits.
 
PainInTheAnes said:
This is taken directly from the IRS website

“A portion of your home may qualify as your principal place of business if you use it for the administrative or management activities of your trade or business and have no other fixed location where you conduct substantial administrative or management activities for that trade or business”

Where else would you conduct your business as an anesthesiologist? In the OR at the hospital where you’re supposed to be monitoring your patients?
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This has already been litigated extensively by the IRS. They lost in Tax Court then appealed to the SCOTUS. They won in SCOTUS but then Congress changed the tax law so Anesthesiologists can deduct their home office by using it for administrative or management activities. This is a non-issue and the IRS will allow your home office and then the Auto deduction.
 
chessknt said:
Why would an anesthesiologist have a home office? Do you normally work out of your home doing anesthesia? That auto expense becomes non-existent once you can't justify doing anesthesia from your home office. Why do you have so much paperwork as an anesthesiologist to justify paying someone part time to do it for you? Would you pay someone else the same amount to do that work?
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I’m assuming you work in an employed W2 model. Think about all the staff at your workplace responsible for scheduling, payroll, benefits, billing, credentialing, malpractice, contracting, contacting patients, taxes, etc.

Now imagine doing that all by yourself as a 1099 independent contractor… in a hospital call room?
 
Guillemot said:
The thing about CME deductions is that you are still spending money on the course. If the course isnt any good then that spent money negates much of the tax savings, and the time spent on the course takes away from the vacation time without yielding professional benefit.

Ideal course would be:

1. Good (time spent worthwhile)
2. Not overly time consuming (time to also vacay)
3. Good vacay destination
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U of U park city course. It’s a great educational experience. And skiing is fun.
 
500k envision job 10’weeks off w2 (45-50 hours)
500k 1099 job 10’weeks off 45-50 hours
450k state w2 job with generous benefits 45 hours a week with 10 weeks off (cme included weeks)

I’d choose the
1. state w2 job
2. Than the 1099 500k
3. Envison job cause their benefits and retirement sucks

Now if 1099 job were 600k. The math gets very complicated over the 450k state w2 job. It would go down to how many average hours worked.

650k the 1099 job would be a no brainer assuming work hours are within 10%.

My home boy is at academic center making $325-hr

The w2 guys are making 425k but only working 38 hours a week. And leaving early a lot.

So he can make 650k 1099 at $325/hr with 10 weeks off fairly easily. But he would have to average 50 hours a week while
The w2 docs are working 38 hours a week.

Everything is a complicated calculation.
 
Arantius said:
This is correct. My accountant is a CPA, JD, and prior IRS agent. I am 1099 and I have virtually zero deductions that are legit. He says it’s very hard to justify an anesthesiologist deducting much because it would have to be legit for our actial
Work (like if I bought my own anesthesia machine). I pay a lot in Taxes (70-80k) but I know guys who pay less than $20k on a 600k year which is insane and ripe for audit.
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You’re 1099 and you pay 80k on an income of what? 80k is not high depending on what your income is
 
Dr. Rude said:
Weddings, funerals, religious services, job interviews.
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Ummm…..sport coats and cool slacks?

Me wearing an awesome sports coat
5CE74BA1-E024-4321-9D43-407CA7F545E0.jpeg

The old fashion suite wearers
6C675B8E-FBD7-48A7-8E38-AD8E8A00DE60.jpeg
 
Dr. Rude said:
How did you figure out who I am and where did you get that old picture of me? I am reporting you for doxing me.
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Of course kidding about the suite thing.

But I stopped wearing them ever since my medical school interviews.

I remember a friend of mine and I both had interviews at U of Wash so we traveled together. In the morning, I showed up wearing a stupid dark suite and he showed up with a sports coat and looked like a zillion bucks - super nice. I of course looked exactly like the 30 other applicants sitting in the room, and he, very sharply dressed, looked like he was our director or something.

I haven’t bought a suite since.
 
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