Locums on the side to get 1099 income / associated tax benefits

[kidthor]

Hi all - I'm wondering if any of you do locums on the side in order to get 1099 income and associated tax benefits (writing things off a business expenses, contributing to 401K beyond your W2 job, etc). I have a decent W2 job but they give limited opportunity for overtime and of course I'm maxing out all of my retirement options at my main job.

Similarly are locums jobs ever worth it to see other practice types?

Just wondering what y'all do out there.. Most of my friends and coworkers seem wary of this idea due to the liability risks and hassle.

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[okayplayer]

Hi all - I'm wondering if any of you do locums on the side in order to get 1099 income and associated tax benefits (writing things off a business expenses, contributing to 401K beyond your W2 job, etc). I have a decent W2 job but they give limited opportunity for overtime and of course I'm maxing out all of my retirement options at my main job.

Similarly are locums jobs ever worth it to see other practice types?

Just wondering what y'all do out there.. Most of my friends and coworkers seem wary of this idea due to the liability risks and hassle.

Great question and something I’ve often thought of as a W2 with limited avenues for tax avoidance.

 

[sevoflurane]

Hi all - I'm wondering if any of you do locums on the side in order to get 1099 income and associated tax benefits (writing things off a business expenses, contributing to 401K beyond your W2 job, etc). I have a decent W2 job but they give limited opportunity for overtime and of course I'm maxing out all of my retirement options at my main job.

Similarly are locums jobs ever worth it to see other practice types?

Just wondering what y'all do out there.. Most of my friends and coworkers seem wary of this idea due to the liability risks and hassle.

Locums is def. worth it if you have the time.
Good to see other practices and networking for potential future jobs in case your current gig doesn’t pan out.

Kidthor.... you do hearts right? Locums hearts can be an excellent avenue for good income.

Yes to 1099 income and write offs/benefits.

 

[aneftp]

Unless you are gonna to generate 50k plus in 1099 side income. Just do schedule C.

Keep it simple.

Llc s Corp etc among with associates fees from filing really isn’t worth it.

 

[Obnoxious Dad]

Hi all - I'm wondering if any of you do locums on the side in order to get 1099 income and associated tax benefits (writing things off a business expenses, contributing to 401K beyond your W2 job, etc). I have a decent W2 job but they give limited opportunity for overtime and of course I'm maxing out all of my retirement options at my main job.

Similarly are locums jobs ever worth it to see other practice types?

Just wondering what y'all do out there.. Most of my friends and coworkers seem wary of this idea due to the liability risks and hassle.

Here's the deal. If you have 1099 income and W2 income you should file a schedule C for the 1099 income and specifically allocate to the Schedule C those expenses that are related to the 1099 income. To the extent that some expenses are associated with both the 1099 and the W2 you should apportion those expenses to the Schedule C in proportion to the income generated by the 1099 divided by total wage and 1099 income. As of 2018 you can't deduct any employee business expenses.

 

[deleted162650]

Great question and something I’ve often thought of as a W2 with limited avenues for tax avoidance.

You're a partner in a PP right? If you guys structure your group correctly, you guys should be able to deduct almost everything that you could as a 1099 through the group as expenses. We get paid W-2, but anything business related including car/phone/equipment/medical/home office/etc. etc. we expense through the group. Hit up your CPA.

 

[DokterMom]

Anyone found a way around the AMT? Or maybe I just don't have enough expenses...

 

[deleted162650]

Anyone found a way around the AMT? Or maybe I just don't have enough expenses...

AMT calculations are significantly different this year. I'm very interested to see how my overall tax bill ends up with all the changes. I'm thinking it's gonna be close to a wash though.

 

[narcotics999]

Anyone found a way around the AMT? Or maybe I just don't have enough expenses...

Make less $$ or make a lot of $$

 

[Obnoxious Dad]

You're a partner in a PP right? If you guys structure your group correctly, you guys should be able to deduct almost everything that you could as a 1099 through the group as expenses. We get paid W-2, but anything business related including car/phone/equipment/medical/home office/etc. etc. we expense through the group. Hit up your CPA.

I will second this.

 

[okayplayer]

I mainly want the solo 401k option. Putting away another 55k/yr in there would be nice.

 

[deleted162650]

I mainly want the solo 401k option. Putting away another 55k/yr in there would be nice.

You guys should look into a defined benefit plan/cash balance plan. I could sock away an additional 170k pre-tax on top of my 55k 401k if I wanted to in 2019.

 

[Twiggidy]

AMT calculations are significantly different this year. I'm very interested to see how my overall tax bill ends up with all the changes. I'm thinking it's gonna be close to a wash though.

My rough math predicts mine will be a wash as well

 

[okayplayer]

You guys should look into a defined benefit plan/cash balance plan. I could sock away an additional 170k pre-tax on top of my 55k 401k if I wanted to in 2019.

We have a meeting with our finance team to discuss this very thing in the next month.

 

[ZzzPlz]

You guys should look into a defined benefit plan/cash balance plan. I could sock away an additional 170k pre-tax on top of my 55k 401k if I wanted to in 2019.

Is this an age-based max contribution for cash balance like ours is?
I can’t put that much away yet—more like $75k at this point.
I’m not sure if that’s because of my age relative to my partners, or a definitive X age= Y dollars max for the plan
I think it also depends on how the plan is set up for the other employees’ (crnas) accounts if I remember right.
Your cash balance plan account is set to grow at about 3% fixed like mine I assume? Any extra money earned is used to fund the plan for us.

These plans are EXTREMELY complicated and took a lot of planning from our bank and accountant to set up

 

[okayplayer]

Next hurdle is convincing my wife that 100k disappearing off the top is a good thing for us actually.

 

[nimbus]

Next hurdle is convincing my wife that 100k disappearing off the top is a good thing for us actually.

Not a difficult hurdle assuming she is the brilliant woman we all know she is. Tell her you are paying your future self instead of Uncle Sam.

 

[okayplayer]

She is smart (also a physician), but when you are already concurrently paying off 2 student loans, more delayed gratification is a hard sell. Assuming my group elects to offer this benefit, the company that administers it has some included meeting time with their financial advisors. I think that will help.

Thankfully she also hates taxes (almost as much as me) and the fact we are saving 40-50% off the top on this money between federal and state income tax should make it an obvious winner.

 

[deleted162650]

Is this an age-based max contribution for cash balance like ours is?
I can’t put that much away yet—more like $75k at this point.
I’m not sure if that’s because of my age relative to my partners, or a definitive X age= Y dollars max for the plan
I think it also depends on how the plan is set up for the other employees’ (crnas) accounts if I remember right.
Your cash balance plan account is set to grow at about 3% fixed like mine I assume? Any extra money earned is used to fund the plan for us.

These plans are EXTREMELY complicated and took a lot of planning from our bank and accountant to set up

Yes, age based max. Our plan was set-up before I joined the practice so I don't know all the details, but I was surprised I could contribute that much since I'm on the young end (30's). We're all MD with more or less the same income so perhaps that's why our limits are so high. Our targeted rate of return is 5%.

 

[kidthor]

You guys should look into a defined benefit plan/cash balance plan. I could sock away an additional 170k pre-tax on top of my 55k 401k if I wanted to in 2019.

How on earth are you doing that? And how do I do that!?!?

 

[Shimmy8]

For those of you who are W2/AMC employed who also are in profit sharing that can put your 18.5k away plus the “profit sharing” of 34kish/year, are there other ways to sock away pretax? Locums? side business? or other solo 401k avenues allowed?

(I’ve just hired a CPA and obviously will be discussing)

 

[aneftp]

Anyone found a way around the AMT? Or maybe I just don't have enough expenses...

Move to no state income tax state. Easiest way to avoid amt.

 

[okayplayer]

Move to no state income tax state. Easiest way to avoid amt.

And more importantly, avoid state income tax.

 

[ZzzPlz]

For those of you who are W2/AMC employed who also are in profit sharing that can put your 18.5k away plus the “profit sharing” of 34kish/year, are there other ways to sock away pretax? Locums? side business? or other solo 401k avenues allowed?

(I’ve just hired a CPA and obviously will be discussing)

Backdoor roth, HSA, 529 or similar college saving plan. That’s all I can think of at the moment

 

[sethco]

For those of you who are W2/AMC employed who also are in profit sharing that can put your 18.5k away plus the “profit sharing” of 34kish/year, are there other ways to sock away pretax? Locums? side business? or other solo 401k avenues allowed?

(I’ve just hired a CPA and obviously will be discussing)

In addition to HSA, back door Roth, Defined Benefit Plan, and a taxable account, if you are a W2 employee and don't own a controlling interest, with a side gig you could beat the 55k limit

As an example, let's say you have a 401k (not a 403b) through your primary employer. Let's say that this 401k sucks (I.e. Poor investments, high fees, etc), but your employer still gives you full profit sharing without a match. For 2018, that would be 36.5k/year.

Now, let's say you have an LLC on the side doing Locums, Expert Witness, surveys, Uber driver, whatever. Through this, your net income after expenses is 100k. Of this, you could open an Individual 401k with Vanguard, Fidelity, Schwab, E-trade, etc. Into this, you can contribute your employee 18.5k plus 20% of your employer earnings (in this case 20k).

Adding this all up
36.5k W2 employer profit
18.5k employee contribution 1099
20k employer contribution 1099

75k total 401k, in addition to back door Roth and HSA. The rule is you can have only one employee contribution per year, but you can have multiple employer contributions as long as they are not related

 

[getdown]

In addition to HSA, back door Roth, Defined Benefit Plan, and a taxable account, if you are a W2 employee and don't own a controlling interest, with a side gig you could beat the 55k limit

As an example, let's say you have a 401k (not a 403b) through your primary employer. Let's say that this 401k sucks (I.e. Poor investments, high fees, etc), but your employer still gives you full profit sharing without a match. For 2018, that would be 36.5k/year.

Now, let's say you have an LLC on the side doing Locums, Expert Witness, surveys, Uber driver, whatever. Through this, your net income after expenses is 100k. Of this, you could open an Individual 401k with Vanguard, Fidelity, Schwab, E-trade, etc. Into this, you can contribute your employee 18.5k plus 20% of your employer earnings (in this case 20k).

Adding this all up
36.5k W2 employer profit
18.5k employee contribution 1099
20k employer contribution 1099

75k total 401k, in addition to back door Roth and HSA. The rule is you can have only one employee contribution per year, but you can have multiple employer contributions as long as they are not related

So I can just sign up for Uber, not drive (or drive once a month), open an LLC and be able to put in 38.5k more into a 401k?

 

[sethco]

So I can just sign up for Uber, not drive (or drive once a month), open an LLC and be able to put in 38.5k more into a 401k?

Ok, just making sure I got this right...

You are proposing taking 100k of post tax money, paying more taxes on top of that since the IRS thinks you have 100k of earned income that hasn't been taxed yet, and then pay taxes on that 401k when you withdraw from it? This would be the exact opposite of an HSA. Instead of a triple tax advantage account, you are paying taxes to the IRS three times! Sure hope you would at least get a Christmas card from the IRS

 

[Hamhock]

So I can just sign up for Uber, not drive (or drive once a month), open an LLC and be able to put in 38.5k more into a 401k?

No. The limits to SEP-IRA (and, I think, i401K too) are limited to percentages of your 1099 income.

HH

 

[getdown]

Ok, just making sure I got this right...

You are proposing taking 100k of post tax money, paying more taxes on top of that since the IRS thinks you have 100k of earned income that hasn't been taxed yet, and then pay taxes on that 401k when you withdraw from it? This would be the exact opposite of an HSA. Instead of a triple tax advantage account, you are paying taxes to the IRS three times! Sure hope you would at least get a Christmas card from the IRS

Thanks for clarifying that up. Hence why I asked.

 

[sethco]

Thanks for clarifying that up. Hence why I asked.

My less snarky response would be just to open a taxable account, which has its own advantages and gives you tax diversification

As an aside, if anyone is looking for more pre-tax space beyond the 55k 401k limit, I hope they are already contributing to an HSA. Triple tax free if used for Medical expenses and acts as a 401k after the age of 65 if not used for medical expenses without any required distributions. Biggest downside though, is if the children are the primary beneficiary it becomes fully taxable upon your death and there is no stretch option. So should be used to before yours and your spouses death

 

[Shimmy8]

In addition to HSA, back door Roth, Defined Benefit Plan, and a taxable account, if you are a W2 employee and don't own a controlling interest, with a side gig you could beat the 55k limit

As an example, let's say you have a 401k (not a 403b) through your primary employer. Let's say that this 401k sucks (I.e. Poor investments, high fees, etc), but your employer still gives you full profit sharing without a match. For 2018, that would be 36.5k/year.

Now, let's say you have an LLC on the side doing Locums, Expert Witness, surveys, Uber driver, whatever. Through this, your net income after expenses is 100k. Of this, you could open an Individual 401k with Vanguard, Fidelity, Schwab, E-trade, etc. Into this, you can contribute your employee 18.5k plus 20% of your employer earnings (in this case 20k).

Adding this all up
36.5k W2 employer profit
18.5k employee contribution 1099
20k employer contribution 1099

75k total 401k, in addition to back door Roth and HSA. The rule is you can have only one employee contribution per year, but you can have multiple employer contributions as long as they are not related

Thanks. I do already have HSA and back door Roth done.

Going to bring this up with my CPA. Won't affect me for 2018 but I'd like to things set up for next year.

I AirBNB my place on long weekends and weeks I'm off work, bring in about 25-30k this year, hopefully 35-40k for 2019. Plus I may do some random locums work. CPA has already asked about starting an LLC to protect me a bit more with the AirBNB, I'll bring up the Individual 401k option. I do have GREAT plan options with Fidelity through employer though.

 

[Millerfan]

Hi, Everyone. As a friendly remind, please check your timesheet for locum company very carefully.
I found that Locumtenens.com repetitively miscalculated my reimbursement even the timesheet was reported correctly. They had to correct it since I had strong evidence. I almost believe that they did it on purposely.