Two jobs, which is higher take home hourly rate?: Per Diem vs IC

[Angry Birds]

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Two jobs:

$250/hr as a per diem hospital employee

$250/hr as IC at one of the major CMG's

All else equal, which is actually a higher take home hourly rate?

In this scenario, per diem gets no benefits aside from malpractice.

I'm not sure about if IC pays malpractice? If yes, is there any difference in hourly rate between per diem and IC in the situation above?

Basically, my question boils down to: What is the per diem-to-IC conversion for hourly pay?

I honestly am super dumb when it comes to these things, so please talk to me like a five year old.

Thanks!

 

[deleted109597]

IC should always cover malpractice (and tail), and if it doesn't don't take the job.
If the per diem job is W2, you'll pay more in taxes, depending on how much you work.

 

[thegenius]

This is a tax question and relies substantially on your tax profile, what kind of deductions you have, expenses, debt, age, single/married, state you live in, stuff like that. There is not a simple conversion between one and the other.

I've filed as an IC over the past three years, if you want some more details about how my taxes played out which might help you, PM me.

Overall:
Let's say you make $400K annually a W2 or IC.
Playing around with Hourly Paycheck Calculator | Hourly Calculator | Paycheck City
(and assuming you live in CA)

• Annual Gross Pay$400,000.00
• Federal Withholding$114,394.50
• Social Security$7,960.80
• Medicare$7,600.00
• California$39,612.79
• SDI$1,149.67

Net Pay

• Net Pay$229,282.24

You would pay less in taxes if you were a IC, I can tell that even just by eyeballing it.

 

[Hamhock]

And it depends on your expenses, how early you are in your career/when you want to retire, and how much "take home" you require.

There's a big difference for the doc who "can" put away around 54K pre-tax into an SEP-IRA as an independent contractor and the same doc who is limited to something like 18K into a 401K of some kind as an employee.

HH

 

[Angry Birds]

And it depends on your expenses, how early you are in your career/when you want to retire, and how much "take home" you require.

There's a big difference for the doc who "can" put away around 54K pre-tax into an SEP-IRA as an independent contractor and the same doc who is limited to something like 18K into a 401K of some kind as an employee.

HH

I gotta be honest. I barely understand anything you just said.

Let's say that I just want straight up cash, and not putting away anything into anything.

Then, would IC still be better than per diem?

IC should always cover malpractice (and tail), and if it doesn't don't take the job.
If the per diem job is W2, you'll pay more in taxes, depending on how much you work.

OK, so your vote is that per diem is gonna be more... IC is less. Is this even without being clever with deductions, etc.?

This is a tax question and relies substantially on your tax profile, what kind of deductions you have, expenses, debt, age, single/married, state you live in, stuff like that. There is not a simple conversion between one and the other.

Damn. I was hoping it was going to be easy.

Roughly speaking, expenses and debt are high... Both jobs are in super expensive places.

Also, I'm only working part time because I'm doing other stuff in life.

I've filed as an IC over the past three years, if you want some more details about how my taxes played out which might help you, PM me.

Overall:
Let's say you make $400K annually a W2 or IC.
Playing around with Hourly Paycheck Calculator | Hourly Calculator | Paycheck City
(and assuming you live in CA)

• Annual Gross Pay$400,000.00
• Federal Withholding$114,394.50
• Social Security$7,960.80
• Medicare$7,600.00
• California$39,612.79
• SDI$1,149.67

Net Pay

• Net Pay$229,282.24

You would pay less in taxes if you were a IC, I can tell that even just by eyeballing it.

OK, so basically in your view, IC usually wins out?


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So far everyone is saying IC wins out...

 

[KGflyboy]

People often forget self employment tax when discussing this stuff. It's been a long time since this was relevant to me, but do t you have to pay about 15% in addition to regular income tax in the first $113,700 of income. Sure, that can be offset by deductions quickly, but it's probably worth mentioning.

 

[Angry Birds]

People often forget self employment tax when discussing this stuff. It's been a long time since this was relevant to me, but do t you have to pay about 15% in addition to regular income tax in the first $113,700 of income. Sure, that can be offset by deductions quickly, but it's probably worth mentioning.

Oh man, so 15% more on the first 113k? That sucks.

Is the decision different if I'm working part-time and not full-time, making in the 250-300k range as opposed to 300-400k range?

Also, what kinds of deductions can I get as an ER doctor? I guess this is too specific to my situation... I think I'll probably get some financial help, maybe with an accountant, before I make a move.

 

[RustedFox]

People often forget self employment tax when discussing this stuff. It's been a long time since this was relevant to me, but do t you have to pay about 15% in addition to regular income tax in the first $113,700 of income. Sure, that can be offset by deductions quickly, but it's probably worth mentioning.

This.
The "self employment" tax.
Sucks, but it is what it is.

 

[Hercules]

Oh man, so 15% more on the first 113k? That sucks.
.

Actually not 15% more. If you’re an employee the. Your employer pays 7.5% and you pay 7.5%. So being self-employed essentially amounts to an additional 7.5% (the employers portion)



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[Alvarez13]

Im 1099 IC status. If you setup an individual 401k and cash balance pension plan, you can set aside approx 90k in retirement and more as you age. Saves me about 43k/yr.

 

[GTP]

Im 1099 IC status. If you setup an individual 401k and cash balance pension plan, you can set aside approx 90k in retirement and more as you age. Saves me about 43k/yr.

Can you provide more details about this ?

 

[Tenk]

Honestly, the amounts you are looking at will be pretty small. I’d pick whichever hospital sucks less so you don’t dread going to work as much. N=1 but I am currently a hospital employee and I freaking love it. I know my CEO by first name, I don’t feel like a hired gun and the admin actually listen to us and do things to help. Take that for what it’s worth!

 

[BoardingDoc]

Im 1099 IC status. If you setup an individual 401k and cash balance pension plan, you can set aside approx 90k in retirement and more as you age. Saves me about 43k/yr.

Where is the 43k coming from? Your effective tax rate can't be 48%.

 

[thegenius]

Where is the 43k coming from? Your effective tax rate can't be 48%.

Nor marginal rate. There is no marginal tax bracket of 48%.

Love the fact you are saving that much though. Does a cash balance pension plan have monthly or yearly administrative fees?

 

[coachB]

Nor marginal rate. There is no marginal tax bracket of 48%.

Love the fact you are saving that much though. Does a cash balance pension plan have monthly or yearly administrative fees?

Sure there is. Federal tax 37% + medicare 2.9% + state tax of 8%. Plenty of places you could hit this.

 

[KGflyboy]

Im 1099 IC status. If you setup an individual 401k and cash balance pension plan, you can set aside approx 90k in retirement and more as you age. Saves me about 43k/yr.

Saving for retirement is great. But saving for retirement doesn't really save you as much money on taxes as you state. It just delays the taxes until you withdraw the money down the road when in theory you will be in a lower tax bracket. Some undetermined portion of the $43k you are "saving" every year is actually still going to the IRS... You've just delayed it until retirement.

 

[Angry Birds]

Honestly, the amounts you are looking at will be pretty small. I’d pick whichever hospital sucks less so you don’t dread going to work as much. N=1 but I am currently a hospital employee and I freaking love it. I know my CEO by first name, I don’t feel like a hired gun and the admin actually listen to us and do things to help. Take that for what it’s worth!

Can you clarify what you mean by "the amounts you are looking at will be pretty small"? Do you mean that the difference between the two jobs in terms of take-home pay will be minimal?

I will say that because I am only working part-time, I need to maximize my take-home pay in order to make ends meet. I'm not interested in saving for retirement right now...that's something a future Angry Brids can worry about. (On a serious note, I'm in a very long process of switching to another career and EM is just a way of paying the bills, so I need to maximize my take home pay while minimizing the number of hours I work.)

 

[Alvarez13]

Saving for retirement is great. But saving for retirement doesn't really save you as much money on taxes as you state. It just delays the taxes until you withdraw the money down the road when in theory you will be in a lower tax bracket. Some undetermined portion of the $43k you are "saving" every year is actually still going to the IRS... You've just delayed it until retirement.

Did you know that you can invest that money in the meantime?

 

[Alvarez13]

Can you provide more details about this ?

Yes. I'll start a new thread when I'm back home as not to deter from AB's post.

 

[miacomet]

Can you clarify what you mean by "the amounts you are looking at will be pretty small"? Do you mean that the difference between the two jobs in terms of take-home pay will be minimal?

I will say that because I am only working part-time, I need to maximize my take-home pay in order to make ends meet. I'm not interested in saving for retirement right now...that's something a future Angry Brids can worry about. (On a serious note, I'm in a very long process of switching to another career and EM is just a way of paying the bills, so I need to maximize my take home pay while minimizing the number of hours I work.)

Woah. Angry Birds, I'm concerned. Not sure how old you are, but you do need to throw some cash in the 401k/IRA/Roth. If you are burned out, then obviously mental health comes first, no question. But you need to do more than make ends meet! Are you taking care of yourself, getting counseling etc and well on the way to a new career? Have you looked at what expenses you can cut out? Look, it doesn't take a ton on a doc salary to stash away 18.5k a year, and frankly you need to do it.

What are the barriers to saving, and how can we help?

 

[KGflyboy]

Did you know that you can invest that money in the meantime?

Yeah, I do this as well. That allows the money to grow, which is great. Many people also like to invest our post income tax earnings as well, for instance Roth IRAs. I guess it's probably good to have a mix of both taxable (401k, pension) and nontaxable income (Roth IRA) at retirement time. Either way, the IRS takes a big chunk either now or later. I'm just really bitter about taxes right now, can you tell? I live in a very non tax friendly state to doctor's, and it just got even worse after the midterms lol. It's so bad I've considered relocating, but I'm starting with a nice SDG with great benefits, so I'll probably tough out the bad tax environment and just complain about it online.

 

[Tenk]

Can you clarify what you mean by "the amounts you are looking at will be pretty small"? Do you mean that the difference between the two jobs in terms of take-home pay will be minimal?

I will say that because I am only working part-time, I need to maximize my take-home pay in order to make ends meet. I'm not interested in saving for retirement right now...that's something a future Angry Brids can worry about. (On a serious note, I'm in a very long process of switching to another career and EM is just a way of paying the bills, so I need to maximize my take home pay while minimizing the number of hours I work.)

It gets a bit more complicated because of deductions when you work part time. I don't know all the rules and tax breaks. My main point was that it is always a lot better to make slightly less money at a job you love versus a job you hate. For instance, I work my main job here that I love but I was working a side job that I hated. If I had to put a $/hr worth on having a job I love versus hate it would definitely be somewhere around $75-100/hr. In other words, that's how much MORE money an hour you would have to pay me to make me think about leaving my current job to work at one I don't enjoy and there is no way the difference between those two will be that much.

You only live once. It sounds like you aren't enjoying EM too much. I was like that at the end of residency. Luckily I found a place I enjoy. One of the things I love about working for a big hospital entity is that they support me SO much more than I felt when I was in academics or an IC. I go to occasional meetings where things we hate actually change, I know all the people, and I get along with my hospitalists and surgeons. Places like this do exist, you just have to look for them. Whatever you decide, I hope you enjoy it more than it sounds like you have been. Sorry bro.

 

[Angry Birds]

You only live once. It sounds like you aren't enjoying EM too much. I was like that at the end of residency. Luckily I found a place I enjoy. One of the things I love about working for a big hospital entity is that they support me SO much more than I felt when I was in academics or an IC. I go to occasional meetings where things we hate actually change, I know all the people, and I get along with my hospitalists and surgeons. Places like this do exist, you just have to look for them. Whatever you decide, I hope you enjoy it more than it sounds like you have been. Sorry bro.

Hey Tenk, thanks for the message. So, I definitely wouldn't have done medicine at all could I go back in time. Having said that, I actually followed your advice and did maximize my situation as best as I could. Currently, I work for a hospital as an employee, and they treat me great, and I'm happy with my work. My burnout levels have decreased a lot and even gone away completely. I'm happy with how much I earn, and my only issue now is that I feel I was not created on this earth to do EM or even medicine. But that's OK, since I'm on track for another career that I do find fulfillment in. It's just 5-10 years before that can be my primary paycheck. In the meantime, I gotta maximize my part-time pay from EM.

The issue is that I want to relocate purely due to wanting to be near family, and I'm scared of leaving my current job which I'm so happy with. I'm scared because I did this once already and was very unhappy at the new place. Therefore, I'm trying to weigh everything carefully, especially since the new place is run by a massive CMG.

 

[miacomet]

Hey Tenk, thanks for the message. So, I definitely wouldn't have done medicine at all could I go back in time. Having said that, I actually followed your advice and did maximize my situation as best as I could. Currently, I work for a hospital as an employee, and they treat me great, and I'm happy with my work. My burnout levels have decreased a lot and even gone away completely. I'm happy with how much I earn, and my only issue now is that I feel I was not created on this earth to do EM or even medicine. But that's OK, since I'm on track for another career that I do find fulfillment in. It's just 5-10 years before that can be my primary paycheck. In the meantime, I gotta maximize my part-time pay from EM.

The issue is that I want to relocate purely due to wanting to be near family, and I'm scared of leaving my current job which I'm so happy with. I'm scared because I did this once already and was very unhappy at the new place. Therefore, I'm trying to weigh everything carefully, especially since the new place is run by a massive CMG.

Sounds like you are making some amazing and positive changes in your life! I hope when your new career reaches fruition, you'll share with us so we can learn and be inspired.

Our situations are not dissimilar, I think, I'm just ten years down the road and readier to exit AND also hoping to be closer to family, but I can tell you one thing- you HAVE to save to be able to exit. You have to, no matter what the other career is; you just can't lose out on all those valuable years of compounding. The one thing I have not regretted is fiscal responsibility- it's given me SO many more options and so much more peace of mind. Can we help you look at your budget and see how and what and where you can save?

If you need to be near family, you need to be near family. No question. I have run into the same issue with family vs job vs location. I I work far from my family, but have cut down and lumped my shifts together, and I spend about a week a month back home. I'm still looking at moving back (and facing similar issues as you). I've considered UC, nonclinical, etc, and it's a work in progress. For me, I wanted to stash some cash before going back to an expensive coast. Now that my residence is paid off and I have a decent NW, my choices are broader. Not saying my choice was right, but look at all the options, including locums, telehealth, nonclinical etc.

If you need to move home you need to move home. Go for it. Do what's best for you. BUT you HAVE to save $$. How can we help on that front?

 

[Tenk]

Hey Tenk, thanks for the message. So, I definitely wouldn't have done medicine at all could I go back in time. Having said that, I actually followed your advice and did maximize my situation as best as I could. Currently, I work for a hospital as an employee, and they treat me great, and I'm happy with my work. My burnout levels have decreased a lot and even gone away completely. I'm happy with how much I earn, and my only issue now is that I feel I was not created on this earth to do EM or even medicine. But that's OK, since I'm on track for another career that I do find fulfillment in. It's just 5-10 years before that can be my primary paycheck. In the meantime, I gotta maximize my part-time pay from EM.

The issue is that I want to relocate purely due to wanting to be near family, and I'm scared of leaving my current job which I'm so happy with. I'm scared because I did this once already and was very unhappy at the new place. Therefore, I'm trying to weigh everything carefully, especially since the new place is run by a massive CMG.

You’re not alone. I actually feel the same way. When I think about plugging away at this for the next twenty years I feel like I have more potential. That’s when I realized I can just live at a lower standard of living, pay off all my loans fast and then eventually work a lot less to pursue other interests. It sounds like you are doing a similar path so I wish you all the best. Just know that what you’re feeling, probably a lot of us feel, it’s just really hard to give up these paychecks.