Independent Contractor

[whasupmd2]

For those of you done with residency, could you help me figure out what expenses are for part-time or full-time independent contractors are and where to find info on premiums? What's the up/downside to being independent vs. employee? Am I missing anything?
Costs include:
-7.65% of FICA usually paid by employer
-Family health insurance (where can I get info on this, what's average premium for a young family?)
-Disability insurance (where can I get info on this, what's average premium for a young physician?
-Malpractice (though I think many IC have this covered by the corp they work for)
-Investments (I assume you just invest in IRA accounts?)
-CME (comes out of pocket but can deduct this as IC)
-Missing anything?

Thanks!

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[NinerNiner999]

Your total Fica cost will be about 13k per year (~15% of your income up to $87500, pre-tax)

Medical Insurance for a family should not be more than $500 per month, including maternity costs. If your SO works, it may be less expensive to use his/her insurance.

Disability insurance can be 1-3% of your total annual salary, and depends on the type. Find a policy that will cover you specifically in the case you cannot function as an ED doctor. Some policies will not pay you if you can work (i.e. are still able to pour a latte at starbucks). Buy this while you are still in residency - it will be MUCH cheaper.

Malpractice is highly variable, but can cost as much as $5000 per month. Find a group that covers this.

Investments - here is the real plus of being an IC: You can save up to $42000 pre-tax and make your own pension package (max is 16k for employees).

CME is deductible, as are office expenses (home office space, desk, computer, electricity, power, chair, etc). Check with an accountant for the specific rules.

Oh, Accounting servies are deductible too.

If you pay your own malpractice, it could cost you almost 90k from your salary to practice. If not, maybe 25k each year, before tax.

 

[whasupmd2]

Thanks that's helpful
-I don't think it's really 15% compared to employee, b/c if you're employee, employer pays 1/2 of the 15.3% and employee pays 1/2; IC pays the total amount, so the difference is really 7.65%
-Have you looked into family insurance? That's really encouraging if it's more like 500 per month, i was estimating more like 10K for the year (family of 3 total)
-Are you looking to work as an IC?

Your total Fica cost will be about 13k per year (~15% of your income up to $87500, pre-tax)

Medical Insurance for a family should not be more than $500 per month, including maternity costs. If your SO works, it may be less expensive to use his/her insurance.

Disability insurance can be 1-3% of your total annual salary, and depends on the type. Find a policy that will cover you specifically in the case you cannot function as an ED doctor. Some policies will not pay you if you can work (i.e. are still able to pour a latte at starbucks). Buy this while you are still in residency - it will be MUCH cheaper.

Malpractice is highly variable, but can cost as much as $5000 per month. Find a group that covers this.

Investments - here is the real plus of being an IC: You can save up to $42000 pre-tax and make your own pension package (max is 16k for employees).

CME is deductible, as are office expenses (home office space, desk, computer, electricity, power, chair, etc). Check with an accountant for the specific rules.

Oh, Accounting servies are deductible too.

If you pay your own malpractice, it could cost you almost 90k from your salary to practice. If not, maybe 25k each year, before tax.

 

[roja]

I would highly recommend a financial planner/accountant. Having functioned as an IC in another field, the taxes will astound you. Not to mention you are jumping into a huge tax bracket.

IC can really screw you unless you are either an MBA and/or CPA already.

IT will be money will spent.

 

[EctopicFetus]

Medical Insurance for a family should not be more than $500 per month, including maternity costs. If your SO works, it may be less expensive to use his/her insurance.

Actually it will be closer to $1000 (but dpeends in some part on where you live) if you are going as a "family" and not as just you and your spouse. Of course if someone is paying some it goes way down .Health insurance is very very $$$. This data is from independent workers in the non health care field. I dont think you will be given any discount because you are a doc. ONe of the families i know has "family" insurance no pre-existing stuff and they pay $1200 per yr.

 

[EctopicFetus]

OP... YOu will pay 6.2% times 2 for Social security 12.4% on the first 87K or so but then you need to come up with 1.45% times 2 for medicare. Also keep in mind that there may be other taxes involved if you work as an IC..

 

[Complications]

OP... YOu will pay 6.2% times 2 for Social security 12.4% on the first 87K or so but then you need to come up with 1.45% times 2 for medicare. Also keep in mind that there may be other taxes involved if you work as an IC..

yeah ... no cap on medicare ... just ssi

 

[digitaltrader]

Disability insurance can be 1-3% of your total annual salary, and depends on the type. Find a policy that will cover you specifically in the case you cannot function as an ED doctor. Some policies will not pay you if you can work (i.e. are still able to pour a latte at starbucks). Buy this while you are still in residency - it will be MUCH cheaper.

Im curious why there is an advantage to buying this while in residency as I have heard this before and makes little sense to me. Of course its cheaper but the coverage is less. Am I missing something here? Also anyone have a recommended provider?

 

[NinerNiner999]

If you buy in as a resident with resident rates, companies will "grandfather" the rate structure to you, as opposed to signing after residency and paying twice the price.

Yes, I'm thinkin heavily about working as an IC - I like the way it is structured...

 

[whasupmd2]

What I mean is that the opporunity cost is for FICA is really not as much as originally posted b/c even as employee you pay 1/2 of FICA. As IC you just have to come up with the other 1/2 as well.

The 1000/month seems to be more what I was thinking.

Thanks! this is really helpful!