Physician Income Guarantee Forgiveness and 1099

[bulldog]

Looking to sign with a group under support of a hospital physician income guarantee. If I fulfill terms of agreement and loan is forgiven during years 2,3,4 (monthly forgiveness = Total amount supplemented / 36 months), I am told I will be given 1099. Has anyone encountered this before and I do you avoid being double taxed or taxed on the "forgiven" portion which you never kept in the first place.

i.e.

You are guaranteed $240,000. Overhead is 50%. You collect $300,000 during your first year. $240,00+$240,000-$300,000 = $180,000 was given by hospital to you as a "loan" which will be given during term. Over 3 years (years 2,3,4), you will be forgiven $60,000 each year you stall. For each year you stand during years 2,3,4, you will be given 1099 for the $60,000

Is it common to negotiate that the group picks up entire portion of the 1099?

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[IamnotFreud]

Looking to sign with a group under support of a hospital physician income guarantee. If I fulfill terms of agreement and loan is forgiven during years 2,3,4 (monthly forgiveness = Total amount supplemented / 36 months), I am told I will be given 1099. Has anyone encountered this before and I do you avoid being double taxed or taxed on the "forgiven" portion which you never kept in the first place.

i.e.

You are guaranteed $240,000. Overhead is 50%. You collect $300,000 during your first year. $240,00+$240,000-$300,000 = $180,000 was given by hospital to you as a "loan" which will be given during term. Over 3 years (years 2,3,4), you will be forgiven $60,000 each year you stall. For each year you stand during years 2,3,4, you will be given 1099 for the $60,000

Is it common to negotiate that the group picks up entire portion of the 1099?

I personally do not understand exactly what you are saying. Are you getting 240k as a salary guarantee + 60k for student loans? Or are you getting 180 + 60k for loans?

If you do get 60k, even if it's for loans, you will taxed on it. I just recently did taxes with my spouse and he got taxed on the scholarship money for his degree, even though he was able to deduct some money for the degree also. So you will get taxed on it.

However, if the money goes directly to loans, ie-without passing through your hands, I believe you do not get taxed on it. I don't know if you can work that out somehow, whereby the group sends a check or something to your loans without you physically getting it, then I think it is not considered taxable income.

 

[BADMD]

Loan forgiveness is taxable as income. If the hospital paid the taxes on this for you, that too would be taxed.

I'm guessing you are going to be set up as an independent contractor and essentially living off your billings. In that case, you aren't being double taxed. (Unless you are paying taxes on the loaned amount, which would be unusual for a loan. In that case, the taxes would already be paid). When the loan is forgiven, it ceases being a loan and you have now been enriched...Uncle Sam wants his cut.

You need to consult a tax attorney and look to see if there is a way to structure a deal to minimize the tax implication.

 

[NotAProgDirector]

I think your math above is incorrect.

You have a job that guarantees $240,000

They have an overhead of 50%. So for every $2 of collections (i.e. money paid by patients), you get $1.

You bill $300,000 your first year. That would make your salary $150,000. But, since they guarantee you a salary of $240K, they give you an additional loan of $90K. (Your example suggests that they loan you the missing collection amount ($180K), which makes no sense).

They now forgive 1/3 of that loan every year for 3 years.

This makes sense -- if you leave before the fifth year, then you need to pay them the money back.

The tax issue is complex, but you'll only pay taxes once. In the first year, your 1099 will only have $150K on it. The $90K loan isn't taxable, as it isn't salary. Then, as they forgive the loan, it becomes taxable. This means that you need to plan for a bigger tax bill in those later years (easily managed by saving the marginal tax rate of the $90K loan to pay the taxes in the future.

So, there is no double taxation. You can get "screwed" a bit if in the later years this extra income bumps you up into a higher tax bracket, or triggers the AMT, or limits your deductions, etc.