How to maximize taxes, pre-tax accounts, etc

[funnybanana]

Like everyone (I think?), I hate taxes and the thought of the government taking my hard earned money. I’m starting a new job with TeamHealth (I know, I know) as a 1099 independent contractor. I want to preserve as much money as I can and pay as little in taxes as I can. Can anyone point me to some good resources and strategies to set myself up?

Thank you.

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[JacobMcCandles]

There is nothing special, honestly. You'll likely have just a few business expenses such as licenses, DEA, etc. if TH doesn't cover that. Set up an individual 401k. If you're healthy get a high deductible health plan and open a health savings account. Some people will mention home offices but I've never really thought that was a legitimate deduction for most 1099 EM docs. Some might mention hiring your spouse, etc. but don't listen to those people. Some might mention mileage deduction but that only counts if you're traveling from one hospital to another. You pay self-employment taxes but will deduct 1/2 of that. I wish there was something magical but there's really not.

 

[cyanide12345678]

If you make >400k you’ll probably save a few thousand dollars as an S corp on Medicare tax (and social security tax if the law changes and the upper limit of social security tax limit is increased significantly)

Create and max out a solo 401k. This should be something like 58k into a tax deferred account.

Look into a deferred compensation plan (i think that’s what they were called) - essentially expensive to set up, have decent cost to maintain, require an actuary, but can allow you to put even 6 figures into a tax deferred account depending on how old you are

Deduct the usual business expenses. Your next computer and even your next car should be a business expense.

Mileage is technically not meant for commute, but irs historically doesn’t give push back for reasonable mileage.

But yeah…realistically it’s really just the solo 401k and a deferred compensation plan and potentially a new car that actually realistically make any material difference

 

[cyanide12345678]

If you really really really want to save money on taxes. Buy an air bnb. Do a cost segregation study. Work >100 hours in the airbnb, and work more hours on it than any other person (so more hours than cleaners etc). Then take 80 percent accelerated depreciation and deduct it against your physician income because you will have real estate tax professional status. This airbnb loophole is incredible if you’re willing to take that risk of running a real estate business

 

[bravotwozero]

What is a 'cost segregation study'?

 

[JacobMcCandles]

Mileage is technically not meant for commute, but irs historically doesn’t give push back for reasonable mileage.

What do you mean ‘technically’? They explicitly say it. You can technically deduct anything you want…

 

[cyanide12345678]

What is a 'cost segregation study'?

You have to usually pay an engineering company 1500-2000 to do it. So normally you deduct depreciation over some 27 years. A cost segregation study basically divides up your home into things that break down faster than 27 years, so windows etc, and you essentially take a lump sum accelerated depreciation on those items which can be as much as 25-40 percent of the price of the property.

So if you buy a million dollar beach front airbnb, do a cost seg study and the firm says you can take a 300k accelerated depreciation on year 1, then if you meet the loophole rules for real estate tax professional for airbnb owners, you can deduct 300k depreciation against 300k of your w2 income, effectively saving you 100-120k in taxes

Edit: and for reference, to acquire that million dollar property, you probably paid down 200k. So your 200k investment basically results in 100k of tax savings alone, without even considering the income the airbnb can generate. This is why the wealthy invest in real estate. I don’t pay a dime of taxes on my real estate right now because i have massive 6 figures of depreciation losses that i rollover every year (i eventually will since this is all tax deferral and not tax elimination)

 

[cyanide12345678]

What do you mean ‘technically’? They explicitly say it. You can technically deduct anything you want…

My 1099 job was in a different city. I always deducted mileage for that. My accountant recommended it as well. If my accountant is willing to put his name on it, I’m fine with it.

If the irs ever disagrees with something, they just send a correction letter and tell you what else you owe.

 

[JacobMcCandles]

My 1099 job was in a different city. I always deducted mileage for that. My accountant recommended it as well. If my accountant is willing to put his name on it, I’m fine with it.

If the irs ever disagrees with something, they just send a correction letter and tell you what else you owe.

That’s fine if people want to do that knowing it isn’t legitimate but anyone reading this should know you’re responsible for your own tax return. If the IRS disagrees, they don’t necessarily just send a letter…they can really be a pain in your side.

 

[cyanide12345678]

That’s fine if people want to do that knowing it isn’t legitimate but anyone reading this should know you’re responsible for your own tax return. If the IRS disagrees, they don’t necessarily just send a letter…they can really be a pain in your side.

Agreed. On paper it’s not for commute. But often in practice ends up with people marking off their commute miles. But it could come back to haunt someone. Though….10000 miles is a 6000 dollar deduction which is roughly 2k of tax savings. It’s usually just a small amount in the grand scheme.

 

[hundreddaysoff]

Look into a deferred compensation plan (i think that’s what they were called) - essentially expensive to set up, have decent cost to maintain, require an actuary, but can allow you to put even 6 figures into a tax deferred account depending on how old you are

Yes, this is my main weird tip to avoid taxes if you're grossing >$400k and can sock a lot away.

The most common type of this plan, and a relatively simple one for an actuary to set up, is a cash balance plan or CBP. You can park >=$80k/y here, tax-deferred ~just like a 401(k). Main downsides are (1) you're supposed to stick to safe, predictable investments like bonds to avoid a bogeyman 50% excise tax, and (2) my actuary charged ~$4k setup fee and then $2--3k/y in annual fees.

But I wouldn't mess with the S-corp in the $400--600k gross range unless you're already paying a CPA. Too much paperwork, quarterly statements, etc. And you don't need an S-corp to have a CBP.

WCI has written quite a bit about these a few years ago.

 

[cyanide12345678]

Yes, this is my main weird tip to avoid taxes if you're grossing >$400k and can sock a lot away.

The most common type of this plan, and a relatively simple one for an actuary to set up, is a cash balance plan or CBP. You can park >=$80k/y here, tax-deferred ~just like a 401(k). Main downsides are (1) you're supposed to stick to safe, predictable investments like bonds to avoid a bogeyman 50% excise tax, and (2) my actuary charged ~$4k setup fee and then $2--3k/y in annual fees.

But I wouldn't mess with the S-corp in the $400--600k gross range unless you're already paying a CPA. Too much paperwork, quarterly statements, etc. And you don't need an S-corp to have a CBP.

WCI has written quite a bit about these a few years ago.

If you make 450k and pay yourself w2 of 220k-250k which is the average salary number for physicians on the bls government website then you essentially save 6k in taxes.

But you need a cpa, you need to set up payroll, your taxes become fairly complex and your accounting costs go up by 1500-2000 a year plus payroll will cost 500 per year for a net savings of 3-4k.

To some it’s worth it, to others the complexity isn’t worth it.

 

[Pudortu]

There is nothing special, honestly. You'll likely have just a few business expenses such as licenses, DEA, etc. if TH doesn't cover that. Set up an individual 401k. If you're healthy get a high deductible health plan and open a health savings account. Some people will mention home offices but I've never really thought that was a legitimate deduction for most 1099 EM docs. Some might mention hiring your spouse, etc. but don't listen to those people. Some might mention mileage deduction but that only counts if you're traveling from one hospital to another. You pay self-employment taxes but will deduct 1/2 of that. I wish there was something magical but there's really not.

I do a home office. I also deduct my miles because I am a director at multiple sites and travel between them. Just keep a log in your car. It's easy. I also bought a vehicle >6k lbs for a huge tax savings. Also I employ my wife to help with administrative stuff and pay her 2k/month to basically max out her individual contribution to a 401k. Also I tax deduct meals we do together to discuss work. Also she helps me keep my schedule and has an MBA so she actually helps me navigate corporate stuff. I dont do a DBA because I don't want to be conservative with my investments. I have an S-corp that employs my wife and myself. By doing this in Texas, I'm able to obtain a PPO health insurance (no real other way to get this as 1099).

The point of my post is that all these things are doable as long as you can defend it in an audit. I am comfortable to say I keep the documentation and proof to do this. There are people doing much much worse.

 

[JacobMcCandles]

I do a home office. I also deduct my miles because I am a director at multiple sites and travel between them. Just keep a log in your car. It's easy. I also bought a vehicle >6k lbs for a huge tax savings. Also I employ my wife to help with administrative stuff and pay her 2k/month to basically max out her individual contribution to a 401k. Also I tax deduct meals we do together to discuss work. Also she helps me keep my schedule and has an MBA so she actually helps me navigate corporate stuff. I dont do a DBA because I don't want to be conservative with my investments. I have an S-corp that employs my wife and myself. By doing this in Texas, I'm able to obtain a PPO health insurance (no real other way to get this as 1099).

The point of my post is that all these things are doable as long as you can defend it in an audit. I am comfortable to say I keep the documentation and proof to do this. There are people doing much much worse.

Saying people are doing much worse isn't really a great defense. Again, home offices for regular pit docs probably would be tough to truly defend. As I mentioned, traveling between sites allows for a mileage deduction but the typical ED doc doesn't do this. I don't work for the IRS but any salary that just allows for something like a retirement account to be maxed out is always a flag. Deducting meals where you 'discuss' work did make me laugh. You can defend anything you want but, in the end, the IRS typically gets the final say.

My point is that people should know what they're doing and the potential consequences. I don't see the IRS going after these small fish at this time, but I wouldn't be surprised to see them tackle some of this stuff once they get staffed up. There would be a lot of easy pickings for them.

 

[Mount Asclepius]

Meh. The IRS isn’t coming after small guys like us EPs. Regardless, your tax submission is a proposal that they essentially always accept. In the very rare event they don’t, you submit your second proposal. I wouldn’t be terribly worried. Live your life in fear and you won’t reap benefits that others easily claim just by not running from their own shadows.

That being said, see the forest for the trees. Pick an above average job. Save above averagely. Maximize tax deferred options. Focus on 401k. CBP is a great option. Supplement with HSA and Backdoor Roth. All the other things like S-corp and home office/mileage are small potatoes in the big picture.

If you make a bunch of money, you can spend a bunch of money. Just decide, is it worth it to spend it now and have to work longer. Or is it worth it to save, and let the power of time and compounding let you spend more later. Find a balance because you can be dead tomorrow.

 

[cyanide12345678]

Yes, this is my main weird tip to avoid taxes if you're grossing >$400k and can sock a lot away.

The most common type of this plan, and a relatively simple one for an actuary to set up, is a cash balance plan or CBP. You can park >=$80k/y here, tax-deferred ~just like a 401(k). Main downsides are (1) you're supposed to stick to safe, predictable investments like bonds to avoid a bogeyman 50% excise tax, and (2) my actuary charged ~$4k setup fee and then $2--3k/y in annual fees.

But I wouldn't mess with the S-corp in the $400--600k gross range unless you're already paying a CPA. Too much paperwork, quarterly statements, etc. And you don't need an S-corp to have a CBP.

WCI has written quite a bit about these a few years ago.

Who is your actuary. I hear charles schwab has a cookie cutter solution that isn't that expensive. I don't know if they still have it or not.

 

[em1234]

another plug for a defined benefit plan. There is a bit of leg work to get it started and they are kind of expensive to maintain, but for my age, (mid 40's) I get to put away an additional pretax 120-150k/y for a measly $2500-3k in administrative fees. I control the investments (mine is at Vanguard) and my adminstrator/actuary is done by a private company in Houston.

As an aside, you don't necessarily have to stick to boring safe investments if you aren't planning on investing into the plan until your 62. People recommend keeping it safe and boring to protect against overfunding the plan (where the 50% excise tax comes in) and it should protect you against a huge market downturn where you are on the hook to cover the losses and keep the plan whole. Honestly, the years with big down turns were some of my best years as my yearly max contribution went up to ~200k and I was essentially "forced" by the plan to buy in heavily on the market dip. My plan is a reasonable combo of vanguard equity index funds.

I have no intention of working in the pit until I'm 62 and honestly might not even be able to stick it out until I'm 50, so I find it to be an invaluable piece of my retirement plan and helps make up for all the compounding time lost during my 20's while in med school and residency all the while keeping the tax man at bay for a while longer.

If you make considerably more than you spend, I would sincerely consider getting one.

 

[GonnaBeADoc2222]

I do a home office. I also deduct my miles because I am a director at multiple sites and travel between them. Just keep a log in your car. It's easy. I also bought a vehicle >6k lbs for a huge tax savings. Also I employ my wife to help with administrative stuff and pay her 2k/month to basically max out her individual contribution to a 401k. Also I tax deduct meals we do together to discuss work. Also she helps me keep my schedule and has an MBA so she actually helps me navigate corporate stuff. I dont do a DBA because I don't want to be conservative with my investments. I have an S-corp that employs my wife and myself. By doing this in Texas, I'm able to obtain a PPO health insurance (no real other way to get this as 1099).

The point of my post is that all these things are doable as long as you can defend it in an audit. I am comfortable to say I keep the documentation and proof to do this. There are people doing much much worse.

A lot of this stuff is pretty sketch and may or may not trigger an audit.

Home office deduction js a known audit trigger. The IRS can send an agent to measure the size of your "home office."

Hiring wife for scheduling is lolz.

I knew a guy who did these questionable writeoffs at a previous job. Always bragged about how little taxes he paid. For some reason at 60 yo, he still needed to work in the pit....

 

[Mbekweni]

A lot of this stuff is pretty sketch and may or may not trigger an audit.

Home office deduction js a known audit trigger. The IRS can send an agent to measure the size of your "home office."

Hiring wife for scheduling is lolz.

I knew a guy who did these questionable writeoffs at a previous job. Always bragged about how little taxes he paid. For some reason at 60 yo, he still needed to work in the pit....

Don’t be afraid to do it but if you do be sure to keep careful records. IRS loves to ask for receipts and catch you with your pants down.

I have a home office but I do a lot of EM group and hospital admin. Lots of deductions there but you need to have receipts. You can’t deduct car mileage for commute but you can for a temporary business location (projected less than 2 years) or between home office and hospital etc. I have a Tesla and use Teslafi website to keep automatic milage logs complete with exact GPS points, times etc. very robust in terms of audit.

S corp can rent your home and pay market rate for it. No income taxes for rents on personal residence less than 15 days per year. Do quarterly journal clubs at your house- document what you talked about and who was there, comps with Airbnb or other local restaurants with private room and minimum spend etc. It’s all about documentation and expect you’ll get an audit though I don’t know anyone personally who has.

As others have said though- good income, good savings rate, use the usual accounts like 401k, HSA with investments, Defined benefit plan and maybe real estate deductions if you have a spouse who can do real estate professional status.

 

[HemorrhagicShock]

S corp can rent your home and pay market rate for it. No income taxes for rents on personal residence less than 15 days per year. Do quarterly journal clubs at your house- document what you talked about and who was there, comps with Airbnb or other local restaurants with private room and minimum spend etc. It’s all about documentation and expect you’ll get an audit though I don’t know anyone personally who has.

I'd like to know more about this. I'm also on a 1099 pay schedule along with having an S-Corp and can make avail of all sorts of strategies but haven't figured out how to maximize the home stuff.

 

[qwerty89]

S corp can deduct all state income tax on your federal taxes through a loophole in many states. Not limited by 10k SALT deduction cap that was put in by Trump.

In places like CA that can mean big tax savings.

 

[Mbekweni]

S corp can deduct all state income tax on your federal taxes through a loophole in many states. Not limited by 10k SALT deduction cap that was put in by Trump.

In places like CA that can mean big tax savings.

That’s a huge one. And this year many areas in CA are a declared disaster zone from floods over the winter so no need to make estimated tax payments until October. I’m paying no taxes at all until then and keeping all accumulated estimated taxes in a treasury money market fund making 5.1% or so (state tax free). This saves another few thousand dollars this year since I run my own S corp payroll.

 

[thegenius]

Like everyone (I think?), I hate taxes and the thought of the government taking my hard earned money. I’m starting a new job with TeamHealth (I know, I know) as a 1099 independent contractor. I want to preserve as much money as I can and pay as little in taxes as I can. Can anyone point me to some good resources and strategies to set myself up?

Thank you.

Just do some research on how to save money. I'm a 1099 and assuming your only income is 1099...your biggest tax breaks will be
- maximizing solo-401K or SEP-IRA contributions (about 68K/year)
- deducting health care premiums
- doing HSA if you can
- expense all business costs
-- some % of cell phone
-- some % of internet
-- all professional fees
-- any food you buy for work for nurses etc
-- you can deduct non-commuting miles
-- supplies
-- stethoscopes, etc.

This is on top of any deductions you get for your mortgage, state taxes paid, etc.

Remember you MUST pay quarterly taxes. Or you'll pay a penalty. I was late by about 10 days last year and I owed the fed $140 more for being late.

Use TurboTax and it will step you through the entire process. You'll have to pay self-employment tax, but you get to expense 1/2 of that as a deduction.

 

[thegenius]

There is nothing special, honestly. You'll likely have just a few business expenses such as licenses, DEA, etc. if TH doesn't cover that. Set up an individual 401k. If you're healthy get a high deductible health plan and open a health savings account. Some people will mention home offices but I've never really thought that was a legitimate deduction for most 1099 EM docs. Some might mention hiring your spouse, etc. but don't listen to those people. Some might mention mileage deduction but that only counts if you're traveling from one hospital to another. You pay self-employment taxes but will deduct 1/2 of that. I wish there was something magical but there's really not.

It's literally not unless they have a separate room / space that they use exclusively for business. And I doubt that is the case 98% of the time.

 

[thegenius]

What do you mean ‘technically’? They explicitly say it. You can technically deduct anything you want…

The IRS doesn't count deducting commuting miles from home to work. So if you want to claim a home office and use it exlusively for work, then every morning you can walk into your office, then walk to your car and drive to work and you get to deduct it. Home offices are red flags for the IRS. But seeing that we are defunding the IRS based on the latest deal passed during the debt ceiling, they may not come after you.

 

[thegenius]

Meh. The IRS isn’t coming after small guys like us EPs. Regardless, your tax submission is a proposal that they essentially always accept. In the very rare event they don’t, you submit your second proposal. I wouldn’t be terribly worried. Live your life in fear and you won’t reap benefits that others easily claim just by not running from their own shadows.

That being said, see the forest for the trees. Pick an above average job. Save above averagely. Maximize tax deferred options. Focus on 401k. CBP is a great option. Supplement with HSA and Backdoor Roth. All the other things like S-corp and home office/mileage are small potatoes in the big picture.

If you make a bunch of money, you can spend a bunch of money. Just decide, is it worth it to spend it now and have to work longer. Or is it worth it to save, and let the power of time and compounding let you spend more later. Find a balance because you can be dead tomorrow.

Your in the top 2%....of course they would more likely look at you than 98% of people making less than you. A lot of this stuff is automated these days anyway. They have calculations like looking at (tax paid / gross) or (tax paid / AGI) and as long as it's greater than a certain percentage, then you are probably OK.

 

[cyanide12345678]

Just do some research on how to save money. I'm a 1099 and assuming your only income is 1099...your biggest tax breaks will be
- maximizing solo-401K or SEP-IRA contributions (about 68K/year)
- deducting health care premiums
- doing HSA if you can
- expense all business costs
-- some % of cell phone
-- some % of internet
-- all professional fees
-- any food you buy for work for nurses etc
-- you can deduct non-commuting miles
-- supplies
-- stethoscopes, etc.

This is on top of any deductions you get for your mortgage, state taxes paid, etc.

Remember you MUST pay quarterly taxes. Or you'll pay a penalty. I was late by about 10 days last year and I owed the fed $140 more for being late.

Use TurboTax and it will step you through the entire process. You'll have to pay self-employment tax, but you get to expense

As a side note, I’ve taken a IRS tax penalty multiple times. At least until last year they were charging 5 percent interest on tax owed. And right now it is incredibly hard to borrow money at 5 percent for anything. So if the IRS is going to give me a loan at 5 percent, honestly i don’t have an issue with delaying payment to them. Plenty of opportunities out there where i can make more than 5%, so I’ve never been scared of any interest penalty.

Ofcourse that’s a very unconventional way of thinking, but the point is that even if you got a 5 percent penalty, and you waited till year end April 15th to pay all your taxes rather than doing quarterly payments, then it’s not the end of the world, especially if you had that money in a HYSA or short term treasuries. Though i don’t know if the interest rate for the irs penalty has recently increased or not, it might have had.

 

[cyanide12345678]

Also back when i was 1099, i almost always paid my taxes on my 2.5 percent cash back on everything Alliant credit card. Happily paid the 1.87% credit card fee.

On 6 figures of taxes, 0.63% can be a good amount of free money

 

[JacobMcCandles]

As a side note, I’ve taken a IRS tax penalty multiple times. At least until last year they were charging 5 percent interest on tax owed. And right now it is incredibly hard to borrow money at 5 percent for anything. So if the IRS is going to give me a loan at 5 percent, honestly i don’t have an issue with delaying payment to them. Plenty of opportunities out there where i can make more than 5%, so I’ve never been scared of any interest penalty.

Ofcourse that’s a very unconventional way of thinking, but the point is that even if you got a 5 percent penalty, and you waited till year end April 15th to pay all your taxes rather than doing quarterly payments, then it’s not the end of the world, especially if you had that money in a HYSA or short term treasuries. Though i don’t know if the interest rate for the irs penalty has recently increased or not, it might have had.

You’ll also be assessed a failure to pay penalty and will likely open yourself up to a higher chance of being audited.

 

[GonnaBeADoc2222]

Don’t be afraid to do it but if you do be sure to keep careful records. IRS loves to ask for receipts and catch you with your pants down.

I have a home office but I do a lot of EM group and hospital admin. Lots of deductions there but you need to have receipts. You can’t deduct car mileage for commute but you can for a temporary business location (projected less than 2 years) or between home office and hospital etc. I have a Tesla and use Teslafi website to keep automatic milage logs complete with exact GPS points, times etc. very robust in terms of audit.

S corp can rent your home and pay market rate for it. No income taxes for rents on personal residence less than 15 days per year. Do quarterly journal clubs at your house- document what you talked about and who was there, comps with Airbnb or other local restaurants with private room and minimum spend etc. It’s all about documentation and expect you’ll get an audit though I don’t know anyone personally who has.

As others have said though- good income, good savings rate, use the usual accounts like 401k, HSA with investments, Defined benefit plan and maybe real estate deductions if you have a spouse who can do real estate professional status.

This approach spunds way more legit.

I wish I had the flexibility to do this.

Oh well.

 

[hundreddaysoff]

Who is your actuary. I hear charles schwab has a cookie cutter solution that isn't that expensive. I don't know if they still have it or not.

No actuary anymore. I rolled the CBP into my VG 401(k) a while ago. Realized that given my relatively low total tax rate at present, that money is better off just staying in taxable accounts than CBP for now.

I did use this actuary in AZ:

MGKS - Retirement Plan Solutions for Your Business

Our mission is to approach every client as a unique engagement and to customize retirement plans to the specific needs of each plan sponsor. The MGKS team consists of a premier staff of actuaries, accountants, consultants, and administrators who are dedicated to the highest standards of our...

www.mgks.com

No complaints. Would use again if I needed one.

BTW, you don't even really need to pay a CPA to do all the S-corp paperwork. The big trick is filling out the 941s and 1140S in exactly the right way, but something like taxbandits makes that pretty easy once you know how.

I suspect that a separate benefit of S-corp vs sole proprietor is that because of all this extra record keeping required with the S-corp, the IRS has a bit more baseline trust and so is a bit less likely to audit you.

 

[MechEDoc]

another plug for a defined benefit plan. There is a bit of leg work to get it started and they are kind of expensive to maintain, but for my age, (mid 40's) I get to put away an additional pretax 120-150k/y for a measly $2500-3k in administrative fees. I control the investments (mine is at Vanguard) and my adminstrator/actuary is done by a private company in Houston.

As an aside, you don't necessarily have to stick to boring safe investments if you aren't planning on investing into the plan until your 62. People recommend keeping it safe and boring to protect against overfunding the plan (where the 50% excise tax comes in) and it should protect you against a huge market downturn where you are on the hook to cover the losses and keep the plan whole. Honestly, the years with big down turns were some of my best years as my yearly max contribution went up to ~200k and I was essentially "forced" by the plan to buy in heavily on the market dip. My plan is a reasonable combo of vanguard equity index funds.

I have no intention of working in the pit until I'm 62 and honestly might not even be able to stick it out until I'm 50, so I find it to be an invaluable piece of my retirement plan and helps make up for all the compounding time lost during my 20's while in med school and residency all the while keeping the tax man at bay for a while longer.

If you make considerably more than you spend, I would sincerely consider getting one.

Who are you using for your DPB? I'm working on setting on up this year, but I haven't been super impressed with the companies that I have reached out to so far. Thanks!

 

[em1234]

Loren

Who are you using for your DPB? I'm working on setting on up this year, but I haven't been super impressed with the companies that I have reached out to so far. Thanks!

Loren D Stark Company
ldsco.com
I've used them for the last 6 years and have no complaints.

 

[Pudortu]

Loren

Loren D Stark Company
ldsco.com
I've used them for the last 6 years and have no complaints.

What’s invested in your DBP? Mainly bonds?

 

[bravotwozero]

Loren

Loren D Stark Company
ldsco.com
I've used them for the last 6 years and have no complaints.

I have lots of complaints. Terrible customer service.
Charge insane amounts of money and have to answer 50 emails before filing IRS form 5500.

Thank God I found a blog post on WCI that showed me how to do it myself.

 

[MechEDoc]

I have lots of complaints. Terrible customer service.
Charge insane amounts of money and have to answer 50 emails before filing IRS form 5500.

Thank God I found a blog post on WCI that showed me how to do it myself.

Are your issues related to DBP with Loren D Stark company?

 

[em1234]

What’s invested in your DBP? Mainly bonds?

No, it mirrors the rest of my portfolio. equities/REIT/Bonds 80/10/10.

Bravotwozero, sorry to hear that. Definitely not my experience, or that of any of my partners. We are all quite pleased with LDSCO.
The fees are exactly what they said they would be. $2500 +/- a couple hundred bucks in any given year for some extra filing/accounting stuff. My 5500 have always been filed on time and without problem. The guy assigned to my account is responsive and helpful.

But bad customer service can certainly sour one on a company forever. Hopefully I continue to have good luck with these guys.

 

[bravotwozero]

Are your issues related to DBP with Loren D Stark company?

No, don’t have a DBP.

 

[Janders]

My main gig is W2, but Ive had side income from a couple 1099s (not a ton of money…). One is an admin position that pays separately and basically consists of chart review and Zoom meetings. The other is making little plastic models and getting paid for them / articles / instagram income etc.

I have a little room that has my computer / camera / mic set up, and all my hobby tools, paint and glue at one desk.

Its TOTALLY a 100% home office (combining two businesses), but only because I turned its hobby into a business…

 

[GonnaBeADoc2222]

My main gig is W2, but Ive had side income from a couple 1099s (not a ton of money…). One is an admin position that pays separately and basically consists of chart review and Zoom meetings. The other is making little plastic models and getting paid for them / articles / instagram income etc.

I have a little room that has my computer / camera / mic set up, and all my hobby tools, paint and glue at one desk.

Its TOTALLY a 100% home office (combining two businesses), but only because I turned its hobby into a business…

What kind of models?

 

[Janders]

What kind of models?

Mostly military / tanks, but occasionally trucks, airplanes.

 

[CoolDoc1729]

If you really really really want to save money on taxes. Buy an air bnb. Do a cost segregation study. Work >100 hours in the airbnb, and work more hours on it than any other person (so more hours than cleaners etc). Then take 80 percent accelerated depreciation and deduct it against your physician income because you will have real estate tax professional status. This airbnb loophole is incredible if you’re willing to take that risk of running a real estate business

Obviously I’m not a lawyer or cpa, but my understanding with the real estate stuff is that you can only have RE professional status if you work >750 hours per year and also more hours than your w2/1099 work. I think it would be hard to justify that many hours with less than a dozen doors. Here’s a link to relevant irs guidelines.

Publication 925 (2023), Passive Activity and At-Risk Rules | Internal Revenue Service

www.irs.gov

If anyone has advice how to get a workaholic husband to not work 1200 hours at the fire station so we could save ~3x his income in taxes I’m all ears 🤦🏻‍♀️

 

[Rekt]

I was under the impression that I’m missing out on fat stacks being W2 vs 1099 but not impressed with what I’m hearing.

What kind of numbers we talking waving with a 450k IC vs 450k W2 with all benefits, 401, hsa?

 

[cyanide12345678]

Obviously I’m not a lawyer or cpa, but my understanding with the real estate stuff is that you can only have RE professional status if you work >750 hours per year and also more hours than your w2/1099 work. I think it would be hard to justify that many hours with less than a dozen doors. Here’s a link to relevant irs guidelines.

Publication 925 (2023), Passive Activity and At-Risk Rules | Internal Revenue Service

www.irs.gov

If anyone has advice how to get a workaholic husband to not work 1200 hours at the fire station so we could save ~3x his income in taxes I’m all ears 🤦🏻‍♀️

Except there’s a loophole that if your average length of stay is less than 7 days then you are running a business and not a a rental and then if you can prove that you materially participate in the business (active rather than passive) then you can take those losses against your w2. I guess technically you’re not a real estate tax professional - but the point is the same - you can deduct depreciation losses against w2 income (just like a real estate tax professional can).

This is the airbnb loophole and can save A lot of money if someone goes down this path.

The Expert Guide to Minimizing Short-Term Rental Taxes | Hospitable.com

A guide with expert insights on how short-term rental investors and property hosts can cut costs and minimize taxes.

hospitable.com

 

[gutonc]

I was under the impression that I’m missing out on fat stacks being W2 vs 1099 but not impressed with what I’m hearing.

What kind of numbers we talking waving with a 450k IC vs 450k W2 with all benefits, 401, hsa?

My impression is that, if all you're doing is going to work at a single job, then W2 vs 1099 is pretty much a wash. Sure, you can put more of your own money into tax preferred retirement accounts as a 1099, but to me that seems like the only significant benefit. And with all the other stuff you have to do and pay for on your own, the overall difference is minimal.

The benefit is when you have side gigs, significant real estate holdings and other income streams. But if all you're doing is punching a clock, the W2 and 1099 jobs are more or less identical.

 

[CoolDoc1729]

Except there’s a loophole that if your average length of stay is less than 7 days then you are running a business and not a a rental and then if you can prove that you materially participate in the business (active rather than passive) then you can take those losses against your w2. I guess technically you’re not a real estate tax professional - but the point is the same - you can deduct depreciation losses against w2 income (just like a real estate tax professional can).

This is the airbnb loophole and can save A lot of money if someone goes down this path.

The Expert Guide to Minimizing Short-Term Rental Taxes | Hospitable.com

A guide with expert insights on how short-term rental investors and property hosts can cut costs and minimize taxes.

hospitable.com

Interesting! TIL

 

[JacobMcCandles]

I was under the impression that I’m missing out on fat stacks being W2 vs 1099 but not impressed with what I’m hearing.

What kind of numbers we talking waving with a 450k IC vs 450k W2 with all benefits, 401, hsa?

The trick to compare the two is to look at the total compensation and employer taxes of the W2 job to compare to the 1099. If just your salary as a W2 is the same as being an IC then the W2 job will be the better deal. A rule of thumb is that the IC job should pay 15-20% more.

 

[GonnaBeADoc2222]

My impression is that, if all you're doing is going to work at a single job, then W2 vs 1099 is pretty much a wash. Sure, you can put more of your own money into tax preferred retirement accounts as a 1099, but to me that seems like the only significant benefit. And with all the other stuff you have to do and pay for on your own, the overall difference is minimal.

The benefit is when you have side gigs, significant real estate holdings and other income streams. But if all you're doing is punching a clock, the W2 and 1099 jobs are more or less identical.

Agree.

Its pretty much a wash unless the above.

When I was 1099 I enjoyed having my solo401k and fully directing my own investments.

 

[bravotwozero]

Yes, I rather like socking away $60k+ in my solo 401k. The more of your retirement funds you can put away in tax advantaged accounts, the better.

 

[Mbekweni]

Yes, I rather like socking away $60k+ in my solo 401k. The more of your retirement funds you can put away in tax advantaged accounts, the better.

The other major thing about 401k that I just recently started to appreciate is tax drag. A balanced portfolio of worldwide index funds will have a yearly dividend of 2% or so. Depending on your state and tax bracket that equates to 0.5-0.8% tax drag per year which doesn’t apply in a 401k compared to a regular taxable brokerage account. Add that to your returns over 30 years and you get an extra 13% in your retirement account in 30 years and 21% at the end of a 30 year retirement if the compounding continues (will be a bit less given RMDs)