Attendings: do you pay your tax all at once or throughout the year?

[deleted1139416]

I know many of you don’t work employment but rather contract or locums. Do you pay your entire tax bill at once or do you have your group/agency withhold it throughout the year?

I would get so much anxiety having to pay $100k in one lump sum….

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[GoSpursGo]

I know many of you don’t work employment but rather contract or locums.

For this reason it is impossible to answer your question. It entirely depends on whether you get a W2 vs a 1099, etc.

If it's 1099 you're probably supposed to make quarterly estimated payments. Which is its own headache.

 

[deleted1139416]

For this reason it is impossible to answer your question. It entirely depends on whether you get a W2 vs a 1099, etc.

If it's 1099 you're probably supposed to make quarterly estimated payments. Which is its own headache.

With a 1099, is that a quarterly payment in addition to, or instead of, an annual tax filing?

 

[GoSpursGo]

With a 1099, is that a quarterly payment in addition to, or instead of, an annual tax filing?

In addition to. If you do the quarterly payments correctly, then you shouldn't owe anything at the annual filing date.

It is a pain in the ass. I know because my fellowship institution treated all housestaff as "post-doctoral fellows" and not as employees, which meant we were technically paid a stipend and not a salary, and so they didn't do any of the tax withholding and we got a 1099.

 

[NotAProgDirector]

You have to pay what you owe every 3 months. You "guess" what you'll owe and pay it quarterly. Then, at the end of the year, you file and either pay the difference or get a refuund. If you underpay, you get a penalty.

 

[operaman]

If W2 then you get withholding.

1099 you absolutely must pay quarterly or else you get hit with penalties. Uncle Sam isn’t fond of you holding his money in a high yield savings account all year and he will want his fair share of that too.

I’m W2 but sadly also have to pay quarterly because for some reason my institution only withholds our bonus payments at a flat 22%. Learned that the hard way the first time I did my taxes and had to write a big check to state and feds. Now when I get bonuses I calculate the extra and send it in.

 

[Miles Gloriosus]

W2 as well.
Have to pay quarterly “estimated payments” for the upcoming year To avoid a massive tax bill when it comes to filing. It’s a guess based on how much was what withheld from the previous year. Even then, seemed not to be enough and have to pay a little more extra on top of what was already withheld and paid in estimated payments.
It can be a huge shock to those getting paid real doctor money for the first time. One person I knew who started first job, she found out she had to pay >$40k when tax filing came around. After the first couple years of filing and making payments, now understand why every doctor lounge I’ve been in has Fox News channel on the TV haha

 

[wysdoc]

I know many of you don’t work employment but rather contract or locums. Do you pay your entire tax bill at once or do you have your group/agency withhold it throughout the year?

I would get so much anxiety having to pay $100k in one lump sum….

Hire an accountant to help you with all this.
It is well worth their expertise in that they know how to pay in a timely manner, avoid penalties, and prevent unexpected large payments

 

[operaman]

W2 as well.
Have to pay quarterly “estimated payments” for the upcoming year To avoid a massive tax bill when it comes to filing. It’s a guess based on how much was what withheld from the previous year. Even then, seemed not to be enough and have to pay a little more extra on top of what was already withheld and paid in estimated payments.
It can be a huge shock to those getting paid real doctor money for the first time. One person I knew who started first job, she found out she had to pay >$40k when tax filing came around. After the first couple years of filing and making payments, now understand why every doctor lounge I’ve been in has Fox News channel on the TV haha

Yeah I hear ya! Seems like every wonderful social program idea put forward requires me to pay more! I liked those ideas better when I was spending someone else’s money.

I thought W2 meant I was in the clear and didn’t have to worry about it. Then I had that sad day doing my taxes and realized rather than the big refund I thought I’d get, I owed about $20k!

And that’s when I learned about the 22% set withholding for quarterly bonus payments. Maybe that’s a standard thing across the board, though it makes absolutely no sense to me why it’s done that way. It’s kinda like how lottery winnings withhold a standard 25% for federal taxes when thought you’re obviously going to be in the 37% bracket after winning millions - never understood that either.

 

[GoSpursGo]

Easy way to beat bonus payments--be an academic pediatric physician-scientist. You'll never see enough patients to earn a bonus

 

[RangerBob]

Independent contractor. As others say above, paying only once a year isn't an option unless you want to be hit with a huge penalty.

I pay 110% of my last year's tax burden over four quarterly payments. I set aside 33% of my earnings into a high yield savings account, which I use to pay those estimated taxes. I've yet to have to pay anything in April (typically I get a nice refund), and then I get to "withdraw" the extra funds from that 33% I set aside since my witholding is never that high.

 

[deleted1139416]

Never knew that 1099 required quarterly payments. I guess that’s better than having to pay once a year! Seems pretty painful to go through the process of “let me set aside this 35,000 from the 100,000 I made this quarter for Uncle Sam”.

Btw do you pay the full 12ish percent for FICA?

 

[deleted1139416]

When you pay the quarterly payment, do you get some sort of “receipt”?

 

[operaman]

Never knew that 1099 required quarterly payments. I guess that’s better than having to pay once a year! Seems pretty painful to go through the process of “let me set aside this 35,000 from the 100,000 I made this quarter for Uncle Sam”.

Btw do you pay the full 12ish percent for FICA?

Oh yes if you’re 1099 you pay both halves of fica. You just figure that into your quarterly payments.

And yes for some reason it hurts more to write the check yourself than to have it withheld.

 

[jhmmd]

I know many of you don’t work employment but rather contract or locums. Do you pay your entire tax bill at once or do you have your group/agency withhold it throughout the year?

I would get so much anxiety having to pay $100k in one lump sum….

Idk which country you are from but I pay my taxes before April 15th.

 

[LucidSplash]

I do locums and pay quarterly estimated. I know some who don’t pay quarterly and just pay lump sum ant tax time and accept the essentially negligible penalty. It just depends on your preference.

I don’t find it that onerous to pay the quarterly taxes. I just set aside a third of what I make into a high interest savings account and then log into EFTPS and pay directly from that account a couple of days before each due date.

Before setting up the SCorp and doing locums, I did my own taxes. But last year I did hire an accountant because personal and business taxes in 3 states was more than I was interested in taking on.

 

[Sleepingdoc]

I know many of you don’t work employment but rather contract or locums. Do you pay your entire tax bill at once or do you have your group/agency withhold it throughout the year?

I would get so much anxiety having to pay $100k in one lump sum….

if you are 1099 then its quarterly.
Dont worry, Uncle Sam will make you pay a lot of money. What you take home is a fraction of what is advertised. Including student loans and other payment.s

 

[ChicagoBear]

And just to make things even more interesting, the IRS "quarter" does not consistently correspond to calendar quarters. Estimated payments are due: April 15 - for the 1st calendar quarter; June 15 - for the second calendar quarter; September 15 for the third calendar quarter; and January 15 of the following year, for the fourth calendar quarter. Some payments are in arrears, some advanced and all payments are not exactly 3 months apart. Then you might have to deal with one or more states, that are under no obligation to have the same rules/due dates as the IRS - but fortunately, most do.

 

[SurfingDoctor]

 

[19pieces19]

Yeah I hear ya! Seems like every wonderful social program idea put forward requires me to pay more! I liked those ideas better when I was spending someone else’s money.

I thought W2 meant I was in the clear and didn’t have to worry about it. Then I had that sad day doing my taxes and realized rather than the big refund I thought I’d get, I owed about $20k!

And that’s when I learned about the 22% set withholding for quarterly bonus payments. Maybe that’s a standard thing across the board, though it makes absolutely no sense to me why it’s done that way. It’s kinda like how lottery winnings withhold a standard 25% for federal taxes when thought you’re obviously going to be in the 37% bracket after winning millions - never understood that either.

What does it mean if you have bonus payments? Is that only for your payments in moonlighting outside your normal salary? Because I thought W2 normally just holds it for you already.

 

[operaman]

What does it mean if you have bonus payments? Is that only for your payments in moonlighting outside your normal salary? Because I thought W2 normally just holds it for you already.

No this is all from my institution. I’m paid on salary plus an rvu bonus for productivity if I meet certain thresholds (which I tend to blow out of the water).

Those productivity bonuses are calculated and paid out quarterly. Unfortunately, for some unknown reason HR only withholds a flat 22% even though the tax ultimately owed for any physician will be much much more. Since they pay it on a regular paycheck, I didn’t realize so little had been withheld until I did my taxes and had to write both my state and the IRS a nice $20k check! That one stung a bit!

Now I just pay the rest of the tax myself when I get bonuses.

 

[NotAProgDirector]

This is a complicated area of tax law. It depends on how the bonus is paid to you. If it's actually given to you as a bonus, then they are taxed at a flat rate of 22% (up to 1 million). If they give you the bonus as salary, then it becomes part of your taxable income and would be taxed at your marginal rate. And some states have different rules for state tax purposes (Cali for example).

 

[Splenda88]

I HAAAAATE the government. How the f... they made me pay 106k in taxes, SS and medicare last year. This is ~9k/month. It's crazy.

 

[SurfingDoctor]

I HAAAAATE the government. How the f... they made me pay 106k in taxes, SS and medicare last year. This is ~9k/month. It's crazy.

That’s means you’re a very high income earner (top 1-2% or you’re doing it all wrong). Good for you.

Be thankful you don’t live in poverty like the 11%.

 

[Splenda88]

That’s means you’re a very high income earner (top 1-2% or you’re doing it all wrong). Good for you.

Be thankful you don’t live in poverty like the 11%.

I don't know if I can call that a high earner. It does not make it any easier anyway. Only the top 0.1% should be paying 26%+ in deductions.

 

[SurfingDoctor]

I don't know if I can call that a high earner. It does not make it any easier anyway. Only the top 0.1% should be paying 26%+ in deductions.

I mean, if you make more than 98 to 99% of the people than live in the US… yeah, you’re a higher earner. It’s irrelevant what you “call” it… it’s statistics.

 

[Splenda88]

I mean, if you make more than 98 to 99% of the people than live in the US… yeah, you’re a higher earner. It’s irrelevant what you “call” it… it’s statistics.

Well, I dont feel it. I should be able to travel first class with my family of 4 to Malaysia. Statistics be damned.

 

[SurfingDoctor]

Well, I dont feel it. I should be able to travel first class with my family of 4 to Malaysia. Statistics be damned.

Feelings are irrelevant. It’s simple math.

Personally, I’m thankful that I can feed my family and each kid has their own room. To many, that’s a luxury.

 

[Splenda88]

Feelings are irrelevant. It’s simple math.

Personally, I’m thankful that I can feed my family and each kid has their own room. To many, that’s a luxury.

You got a point. I am very thankful that I can provide for my family.

I thank God everyday for putting me in that position. I am indeed very fortunate.