Supplemental Income - W2 versus 1099

Discussion in 'Emergency Medicine' started by FirstNobleTruth, Feb 28, 2017.

  1. SDN is made possible through member donations, sponsorships, and our volunteers. Learn about SDN's nonprofit mission.
  1. FirstNobleTruth

    FirstNobleTruth 7+ Year Member

    Joined:
    Apr 20, 2008
    Messages:
    15
    Likes Received:
    3
    Status:
    Attending Physician
    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.
     
  2. SDN Members don't see this ad. About the ads.
  3. Pudortu

    Pudortu 7+ Year Member

    Joined:
    Apr 14, 2008
    Messages:
    40
    Likes Received:
    10
    Status:
    Resident [Any Field]
    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 and Boatswain2PA like this.
  4. Raryn

    Raryn Infernal Internist/Enigmatic Endocrinologist 7+ Year Member

    Joined:
    Apr 25, 2008
    Messages:
    5,356
    Likes Received:
    2,420
    Status:
    Fellow [Any Field]
    Verified
    Physician
    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)
     
  5. fahimaz7

    fahimaz7 10+ Year Member

    Joined:
    Jul 18, 2004
    Messages:
    3,189
    Likes Received:
    126
    Location:
    Colorado
    Status:
    Attending Physician
    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!
     
    Last edited: Feb 28, 2017
  6. hundreddaysoff

    hundreddaysoff 2+ Year Member

    Joined:
    Jan 2, 2013
    Messages:
    43
    Likes Received:
    16
    Location:
    down by the river
    Status:
    Resident [Any Field]
    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.
     
    Last edited: Mar 3, 2017
  7. bravotwozero

    bravotwozero Chronically ambitious 10+ Year Member

    Joined:
    Sep 19, 2004
    Messages:
    844
    Likes Received:
    141
    Location:
    Houston
    Status:
    Attending Physician
    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 ....


    Sent from my iPhone using Tapatalk
     
  8. eosinophilic

    eosinophilic 5+ Year Member

    Joined:
    Sep 21, 2010
    Messages:
    36
    Likes Received:
    12
    1099. deductions.
     
  9. GonnaBeADoc2222

    GonnaBeADoc2222 7+ Year Member

    Joined:
    Oct 31, 2008
    Messages:
    123
    Likes Received:
    48
    Status:
    Resident [Any Field]
    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...
     
  10. scootad.

    scootad. Senior Member 10+ Year Member

    Joined:
    Jun 1, 2001
    Messages:
    819
    Likes Received:
    77
    Malpractice insurance
     
  11. Raryn

    Raryn Infernal Internist/Enigmatic Endocrinologist 7+ Year Member

    Joined:
    Apr 25, 2008
    Messages:
    5,356
    Likes Received:
    2,420
    Status:
    Fellow [Any Field]
    Verified
    Physician
    Conferences? Mileage getting to the work site?
     
  12. bravotwozero

    bravotwozero Chronically ambitious 10+ Year Member

    Joined:
    Sep 19, 2004
    Messages:
    844
    Likes Received:
    141
    Location:
    Houston
    Status:
    Attending Physician
    Most employers provide that, even for 1099s. Not likely to be a deductible expense.


    Sent from my iPhone using Tapatalk
     
  13. Raryn

    Raryn Infernal Internist/Enigmatic Endocrinologist 7+ Year Member

    Joined:
    Apr 25, 2008
    Messages:
    5,356
    Likes Received:
    2,420
    Status:
    Fellow [Any Field]
    Verified
    Physician
    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.
     
  14. The White Coat Investor

    The White Coat Investor AKA ActiveDutyMD Partner Organization 10+ Year Member

    Joined:
    Nov 18, 2002
    Messages:
    4,756
    Likes Received:
    1,424
    Status:
    Attending Physician
    Verified
    Physician
    SDN
    Partner
    Commuting is not deductible. Only mileage between work sites can be deducted.
     
  15. msweph

    msweph 2+ Year Member

    Joined:
    Jun 27, 2013
    Messages:
    1,559
    Likes Received:
    500
    Status:
    Pharmacist
    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.
     
  16. bravotwozero

    bravotwozero Chronically ambitious 10+ Year Member

    Joined:
    Sep 19, 2004
    Messages:
    844
    Likes Received:
    141
    Location:
    Houston
    Status:
    Attending Physician
    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.


    Sent from my iPhone using Tapatalk
     
  17. scootad.

    scootad. Senior Member 10+ Year Member

    Joined:
    Jun 1, 2001
    Messages:
    819
    Likes Received:
    77
    Do EM doctors typically run an emergency dept out of their home office? [not asking to be judgy, I'm simply curious]
     
  18. bravotwozero

    bravotwozero Chronically ambitious 10+ Year Member

    Joined:
    Sep 19, 2004
    Messages:
    844
    Likes Received:
    141
    Location:
    Houston
    Status:
    Attending Physician
    No, but you don't need to in order to setup a home office.


    Sent from my iPhone using Tapatalk
     
  19. The White Coat Investor

    The White Coat Investor AKA ActiveDutyMD Partner Organization 10+ Year Member

    Joined:
    Nov 18, 2002
    Messages:
    4,756
    Likes Received:
    1,424
    Status:
    Attending Physician
    Verified
    Physician
    SDN
    Partner
    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.
     
  20. The White Coat Investor

    The White Coat Investor AKA ActiveDutyMD Partner Organization 10+ Year Member

    Joined:
    Nov 18, 2002
    Messages:
    4,756
    Likes Received:
    1,424
    Status:
    Attending Physician
    Verified
    Physician
    SDN
    Partner
    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.
     
  21. msweph

    msweph 2+ Year Member

    Joined:
    Jun 27, 2013
    Messages:
    1,559
    Likes Received:
    500
    Status:
    Pharmacist
    Oh I agree- not even close- which is why I don't risk it with lying. A co-worker go auditors for lying last year and had to pay an attorney 2K to argue his way out of it.
     
  22. GonnaBeADoc2222

    GonnaBeADoc2222 7+ Year Member

    Joined:
    Oct 31, 2008
    Messages:
    123
    Likes Received:
    48
    Status:
    Resident [Any Field]
    Can I write off moving expenses?
     
  23. bravotwozero

    bravotwozero Chronically ambitious 10+ Year Member

    Joined:
    Sep 19, 2004
    Messages:
    844
    Likes Received:
    141
    Location:
    Houston
    Status:
    Attending Physician
    That's a write off for anyone regardless of income type. Unless your employer is reimbursing you.


    Sent from my iPhone using Tapatalk
     
  24. The White Coat Investor

    The White Coat Investor AKA ActiveDutyMD Partner Organization 10+ Year Member

    Joined:
    Nov 18, 2002
    Messages:
    4,756
    Likes Received:
    1,424
    Status:
    Attending Physician
    Verified
    Physician
    SDN
    Partner

About the ads

Similar Threads
  1. YGK
    Replies:
    20
    Views:
    11,980
  2. midwesterner123
    Replies:
    9
    Views:
    1,738
Loading...

Share This Page