IC status and incorporating

[Droperidol]

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I've tried searching the forum and there's been very limited responses. If you are IC, as I am about to be in July, can you please let me know how you chose to set up your business?

I'm having trouble getting bogged down in tax codes and whatnot to get a good overview of what people like from an LLC, S-Corp, or if all else fails, C-Corp. How did you choose? I will be an IC in Texas, so I think LLC is an option for me.

Once you have a corporation set up, how did you choose "a reasonable salary?" I don't want to go through the trouble of all this just to get audited.

Do any of you have high quality resources to read? Thanks in advance.

 

[DocRGR]

I second the above post and am also interested in what resources folks used to set up their business.

 

[The White Coat Investor]

I think it's high quality, but I'm kind of biased.

http://whitecoatinvestor.com/incorporating-to-reduce-liability-and-to-save-taxes/

Here's the deal- as an emergency doc independent contractor you should be either a sole proprietor or an S Corp. No point in an LLC. It won't save you taxes, it won't give you any liability protection, and it won't impress anyone.

All an S Corp saves you is the amount of Medicare taxes (2.9%) of the percent of your income that you call dividends instead of salary. So if you make $350K and call $250K salary and $100K dividends, then you save $2900 on your taxes. The S Corp has some hassles and costs associated with it, but you should still come out ahead. Only you can decide if the hassle is worth it. The S Corp really doesn't save you any liability either.

You'd better have some reasonable basis for your salary. Use a salary survey or something. Definitely don't declare less than half your income or less than $114K as salary. Those would be huge red flags.

 

[EM_Rebuilder]

Not worth it, none of these really truly shield you from malpractice liability. Furthermore, welcome to Texas, where malpractice will be the LAST thing you need to worry about.

There is slight tax benefits, as mentioned above, but when lawyer fees are added in, its dang near a wash and complicates things. I hate the 'just work another shift mentality', but in this instance, save the hassles, work another shift per year, and it pays the hassles/fees.

 

[Arcan57]

Agree with above. No point to an LLC for ICs. S-Corp is usually a wash unless you have other business ventures that you want shielding for. Don't expect any protection in malpractice litigation.

 

[pratik7]

It has been a while since I have met with my CPA but after running a bunch of numbers I came out far ahead with the S corp. It is not for medicolegal protection but for tax purposes. You do pay less in FICA/Medicare. I forget what you can deduct with a 1099 only. However, with the S corp I have a laundry list of deductions. I get 50 cents a mile I drive for business purposes( to work, bank, post office ect). I am able to put about 40k( half is my contribution and half is my company's) in a retirement account. I deduct travel for CME's, computers, printers, dinners, cell phone, internet ect. I have a home office so I can also deduct a portion of the all utilities in my home.

 

[EM_Rebuilder]

It has been a while since I have met with my CPA but after running a bunch of numbers I came out far ahead with the S corp. It is not for medicolegal protection but for tax purposes. You do pay less in FICA/Medicare. I forget what you can deduct with a 1099 only. However, with the S corp I have a laundry list of deductions. I get 50 cents a mile I drive for business purposes( to work, bank, post office ect). I am able to put about 40k( half is my contribution and half is my company's) in a retirement account. I deduct travel for CME's, computers, printers, dinners, cell phone, internet ect. I have a home office so I can also deduct a portion of the all utilities in my home.

Everything you mentioned can be deducted with 1099 income without the SCorp. You save the FICA/Medicare tax only. What we are saying is after fees to setup, and additional tax advising fees and maintenance of the S-Corp you will probably come out 'a fee thousand' ahead at best. Anyone I have ever asked says there is an increased chance of audit of these 'shelters' as well.

 

[EM Junkie]

Everything you mentioned can be deducted with 1099 income without the SCorp. You save the FICA/Medicare tax only. What we are saying is after fees to setup, and additional tax advising fees and maintenance of the S-Corp you will probably come out 'a fee thousand' ahead at best. Anyone I have ever asked says there is an increased chance of audit of these 'shelters' as well.

^this +1

I'm an independent contractor in Texas, and not incorporated. I put it all under 1099, and deduct that way. On a related note, you cannot write off mileage to/from work as your primary place of business. My understanding is that you can write off mileage to a secondary practice location.

 

[pratik7]

^this +1

I'm an independent contractor in Texas, and not incorporated. I put it all under 1099, and deduct that way. On a related note, you cannot write off mileage to/from work as your primary place of business. My understanding is that you can write off mileage to a secondary practice location.

I have a home office which is my "primary" business location ( I am on a 1099 with 2 groups and 6 different hospitals I work at). Since my s-corp address is listed as my home and I don't have a single place I work at, I can deduct miles to work. So my CPA says. I also found this with a quick google search

Commuting costs to your normal place of business are not deductible.
Home office: If your principal place of business is a home office, you can deduct the cost of any trips made to another location for business. The commuting rule does not apply. http://taxreceipts.com/tax-guide/#sthash.ump9Rxao.dpuf

 

[The White Coat Investor]

I have a home office which is my "primary" business location ( I am on a 1099 with 2 groups and 6 different hospitals I work at). Since my s-corp address is listed as my home and I don't have a single place I work at, I can deduct miles to work. So my CPA says. I also found this with a quick google search

Commuting costs to your normal place of business are not deductible.
Home office: If your principal place of business is a home office, you can deduct the cost of any trips made to another location for business. The commuting rule does not apply. http://taxreceipts.com/tax-guide/#sthash.ump9Rxao.dpuf

You're both right. It can get a little bit gray. If your principal place of business is your home, then driving from there to hospitals/clinics etc is deductible. Working at multiple sites helps a great deal with this argument. It also helps if you can prove you did some work at home prior to leaving for the hospital.

 

[old_boy]

Reviving an old thread--- will Trump's tax plan make it more beneficial to incorporate?

I vote yes--- for single (not married) filers making more than $157,500 taxable income or married filers making more than $315,000, it will enable them to pay themselves a W2 salary than get the pass-through 20% deduction on business "profit" from their S-Corp. Basically I see it as a way to still qualify for pass-through benefits for high earners, since from what I've been able to find it seems the 20% deduction will phase out completely very quickly if you make more than those limits. For those smarter than me, am I thinking about this right?

 

[Alvarez13]

Can someone show me an example of how this works using real life numbers? I'm so lost.

 

[Boatswain2PA]

This should clear it all up (yeah right!)...
www.forbes.com/sites/kellyphillipserb/2017/12/22/what-tax-reform-means-for-small-businesses-pass-through-entities/#50eaf3406de3

 

[GonnaBeADoc2222]

Reviving an old thread--- will Trump's tax plan make it more beneficial to incorporate?

I vote yes--- for single (not married) filers making more than $157,500 taxable income or married filers making more than $315,000, it will enable them to pay themselves a W2 salary than get the pass-through 20% deduction on business "profit" from their S-Corp. Basically I see it as a way to still qualify for pass-through benefits for high earners, since from what I've been able to find it seems the 20% deduction will phase out completely very quickly if you make more than those limits. For those smarter than me, am I thinking about this right?

To my understanding, "sole proprietor" is included under the umbrella definition of "pass through" as it applies to the tax reform bill/

 

[Alvarez13]

To my understanding, "sole proprietor" is included under the umbrella definition of "pass through" as it applies to the tax reform bill/

That's how I understand it. However, I'm single and am making way more than the threshold, so it doesn't help me or most EM docs.

 

[Restart13]

You're both right. It can get a little bit gray. If your principal place of business is your home, then driving from there to hospitals/clinics etc is deductible. Working at multiple sites helps a great deal with this argument. It also helps if you can prove you did some work at home prior to leaving for the hospital.

What if you were to expense a company lease (<=$400/month) that you used as a daily driver? I hear about other specialists doing something similar where the company effectively pays for the partners leases/company vehicles.