Supplemental Income - W2 versus 1099

[FirstNobleTruth]

I have a 0.5 FTE job, which I greatly enjoy and am passionate about, and provides benefits (health insurance, dental insurance, etc), but does not pay very well Without going into particulars, there is no option to expand that to full-time.

I am trying to figure out the best way to supplement this income, in order to meet my goals of aggressive loan repayment and general WCI-esque financial beliefs.

The two primary options:
-additional shifts as a Employee/W-2, at a standard rate for ER work in the area
-locums shifts as an IC w/ 1099 income, w/ the rate being ~$100/hr more than the employee rate (at a different site, within 2-4 hour driving distance, w/ hotel and car covered).

From a purely financial perspective - the IC income makes much more sense, right? I already have my benefits covered through my primary W-2 position, and so I wouldn't even have to account for that in the IC income. It would also allow me to access an individual 401(k), correct? Now I know I would have to withhold my own taxes, but I'm getting taxed on the potential additional W-2 income as well.

Any thoughts? Thank you.

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[Pudortu]

Definitely go with the IC (in financial terms). Not only can you do solo401k, you can also tax deduct lots of stuff as an IC.

 

[Raryn]

Definitely go with the IC (in financial terms). Not only can you do solo401k, you can also tax deduct lots of stuff as an IC.

I concur. Schedule C is a hell of a lot more flexible with deductions. And that's without even getting into any benefits of self-incorporation (which may or may not be useful depending on your personal circumstances).

The only downside to a 1099 job in this situation is paying both halves of FICA, but even that is not a huge big deal assuming your w2 pays more than $127,000/year. (Even below that, it is a difference of a few grand at most)

 

[fahimaz7]

Not only can you do solo401k, you can also tax deduct lots of stuff as an IC.

Quick question:

Job A: Employee model. 18k/year deferred + 15% match =53k/year.
Job B: 1099 model. Say 50k extra income/year
- Is the max 25% of the gross (ie 12,500)?
- Can you still do 18k+25% to equal $30,500 if you are contributing as an employee under job A?

I am reading how the contribution limits vary (SEP IRA vs Solo 401k), but trying to figure out how much I could shelter under the above 1099 plan. It seems to be if I'm maxing out my "employee" contribution under job A (18k/year), there may be no benefit/difference between the SEP IRA and Solo 401k in terms of total contributions allowed.

Thanks!

 

[hundreddaysoff]

Going through the same process.

My understanding is that the max is 20% of the net income for IC.

At least in a solo-k, you can do 18k + 20%, up to a total of 18k + 54k. As long as the 18k is elective deferral (ie taken as an employee) and the 20% is employer contribution.

 

[bravotwozero]

Keep in mind though if you want to put away some after tax money in a 'backdoor Roth IRA', you can't do that if you have a sep ira, only with 401ks. So if you're going to do employee and ic model, you could perhaps just stick with 401ks and contribute to a backdoor Roth ....


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[eosinophilic]

1099. deductions.

 

[GonnaBeADoc2222]

1099. deductions.

So, I've done a bunch of reading about this. I am about to start an IC job which requires some travel to different sites. The "employer" pretty much pays for everything: licensing, DEAs, transportation, lodging, food per diem. Will likely be on my wife's health insurance.

What else can I write off on my Schedule-C? Running out of substantial things to write off. Cell phone and scrubs / white coats seems like the next thing...

 

[scootad.]

Malpractice insurance

 

[Raryn]

So, I've done a bunch of reading about this. I am about to start an IC job which requires some travel to different sites. The "employer" pretty much pays for everything: licensing, DEAs, transportation, lodging, food per diem. Will likely be on my wife's health insurance.

What else can I write off on my Schedule-C? Running out of substantial things to write off. Cell phone and scrubs / white coats seems like the next thing...

Conferences? Mileage getting to the work site?

 

[bravotwozero]

Malpractice insurance

Most employers provide that, even for 1099s. Not likely to be a deductible expense.


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[Raryn]

Most employers provide that, even for 1099s. Not likely to be a deductible expense.


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My 1099 provides it, and then puts it on my 1099. As in, I have to report their provided malpractice insurance as income, and then promptly deduct it. Net zero for me, just another line item on my tax return.

 

[The White Coat Investor]

Conferences? Mileage getting to the work site?

Commuting is not deductible. Only mileage between work sites can be deducted.

 

[bravotwozero]

You could set up a home office at home. Your commute from your home office to your worksite is then a commute between workplaces, which makes your commute eligible for the mileage deduction.


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[scootad.]

Do EM doctors typically run an emergency dept out of their home office? [not asking to be judgy, I'm simply curious]

 

[bravotwozero]

No, but you don't need to in order to setup a home office.


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[The White Coat Investor]

No, but you don't need to in order to setup a home office.


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This strategy, while viable, is something to be pretty cautious with. Basically, you need to document some work both immediately before your commute and immediately after....all year long. Lots of documentation is probably going to be needed in case of an audit.

 

[The White Coat Investor]

Doesn't mean people don't claim it- I've had people tell me their meals at work are deductible because they can't leave the hospital and that their mileage is as long as they track it and only use their car to drive to work.

People claim all kinds of stuff. That's called tax evasion. They hope the IRS will forgive them due to ignorance if they lose the gamble that they won't get audited. Both of your examples are clearly not permitted deductions and the IRS regs are very clear on both of them.

 

[GonnaBeADoc2222]

Can I write off moving expenses?

 

[bravotwozero]

That's a write off for anyone regardless of income type. Unless your employer is reimbursing you.


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[The White Coat Investor]

Can I write off moving expenses?

Let me teach you to fish: http://bfy.tw/AkTq

Or if that's too hard, here's a fish: Moving Expense Deduction

https://www.irs.gov/pub/irs-pdf/f3903.pdf

It plugs into line 26 on the 1040.