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  • New Anesthesiology Attending since July

    In Private practice and had to set up a C-corp (Many in the group with S-corp were recently audited and they insisted that I do c-corp). The group offers an awesome pretax Profit sharing plan that will allow me to defer about $60k in taxes each year but I am not eligible to contribute until January 2022. As I understand it my corporation is paid a 1099 from my group and I pay myself a W-2 from there. I am wondering if I would be able to create my own solo 401k under this scenario or if there were any work arounds. Thanks for any help that anyone can provide.

  • #2
    Originally posted by coug16 View Post
    In Private practice and had to set up a C-corp (Many in the group with S-corp were recently audited and they insisted that I do c-corp). The group offers an awesome pretax Profit sharing plan that will allow me to defer about $60k in taxes each year but I am not eligible to contribute until January 2022. As I understand it my corporation is paid a 1099 from my group and I pay myself a W-2 from there. I am wondering if I would be able to create my own solo 401k under this scenario or if there were any work arounds. Thanks for any help that anyone can provide.
    What exactly was the rationale for c-corp?

    Comment


    • #3
      Originally posted by childay View Post

      What exactly was the rationale for c-corp?
      if you pay more tax, the IRS is happier?

      Comment


      • #4
        Pretty silly to insist on a C Corp because of an audit.

        Comment


        • #5
          OP, we had a similar setup (except with S-corps) for a long time. Yes, you set up a retirement plan; at the time I set up a SEP-IRA but a solo-401k is probably better so that you can do BDRoth contributions.

          I had an accountant to help with the paperwork/deadlines and other referrals (payroll services, attorney)--I felt like I had too much on my plate in terms of learning how to be an attending, boards, new town, new "serious" relationship, etc etc excuses excuses.

          It would be interesting to hear more about the audit stuff with your group. I love hearing about all the machinations that docs do to justify the IC status, when in reality, they work 99% for one company which tells them when/where/how they are going to work (i.e. an employee). We finally went the route of becoming employees of our group and dissolving the dozens of individual corps. Lost some perks, but made life a whole lot simpler on the margin (not to mention an improved economy of scale--do you think there is a difference in customer service with a 5 digit account as opposed to an 8 digit one?). And as I've learned from WCI in general and this forum in particular, ain't no reason you can't set up some 1099/sole proprietor situation in addition to your main gig...potentially getting the best of both worlds.

          Comment


          • #6
            I’m in a similar setup, however I am an S Corp. I am using a CPA which helps immensely with paperwork, making sure monthly EFTPS (taxes) are paid, etc. I opened a solo 401k with E*Trade, made Roth 401k contributions (employee portion; the employer portion was traditional as required) during my transition year from fellowship to attending, max my solo 401k this year ($57k) in all traditional. Did back door Roth IRA last year and this year for spouse and self. HSA. I don’t understand why the requirement for a C corp, as my other partners are all S corps.

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            • #7
              I've never understood how these arrangements pass muster. I'd assume you'd have an affiliated service group and can't set up your own 401k. Why a C corp and not just be a sole proprietor?

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              • #8
                Originally posted by jhwkr542 View Post
                I've never understood how these arrangements pass muster. I'd assume you'd have an affiliated service group and can't set up your own 401k. Why a C corp and not just be a sole proprietor?
                My accountant who has taken care of many of my partners and seems to know the business well said that since all of the income from my corporation is directly from my salary as basically an employee that it's hard to justify a salary any lower than what I actually make and that because of that there is really no benefit of S-corp over C-corp.

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                • #9
                  Am I then able to max out a profit sharing plan and a solo-401k each year which is almost 60k each tax deferred?

                  Comment


                  • #10
                    Originally posted by coug16 View Post

                    My accountant who has taken care of many of my partners and seems to know the business well said that since all of the income from my corporation is directly from my salary as basically an employee that it's hard to justify a salary any lower than what I actually make and that because of that there is really no benefit of S-corp over C-corp.
                    But why incorporate at all? What's the benefit?

                    Comment


                    • #11
                      The group requires it for all partners for some reason. Not sure. Liability purposes?

                      Comment


                      • #12
                        Originally posted by coug16 View Post
                        The group requires it for all partners for some reason. Not sure. Liability purposes?
                        No.

                        I think we used the corps because some of the guys were aggressive/optimistic with deductions; I'll leave it at that.

                        Study the taxation of C corps vs S corps and let us know if your accountant's explanation to you makes sense. I'd really love to hear his/her side of the story, because it sure seems like malpractice.

                        Comment


                        • #13
                          Originally posted by coug16 View Post
                          Am I then able to max out a profit sharing plan and a solo-401k each year which is almost 60k each tax deferred?
                          Yes. Is your accountant not helping with this? I mean, it seems the least they could do since they set you up to give extra heaps of cash to The Man every year.

                          Comment


                          • #14
                            Originally posted by G View Post
                            OP, we had a similar setup (except with S-corps) for a long time. Yes, you set up a retirement plan; at the time I set up a SEP-IRA but a solo-401k is probably better so that you can do BDRoth contributions.

                            I had an accountant to help with the paperwork/deadlines and other referrals (payroll services, attorney)--I felt like I had too much on my plate in terms of learning how to be an attending, boards, new town, new "serious" relationship, etc etc excuses excuses.

                            It would be interesting to hear more about the audit stuff with your group. I love hearing about all the machinations that docs do to justify the IC status, when in reality, they work 99% for one company which tells them when/where/how they are going to work (i.e. an employee). We finally went the route of becoming employees of our group and dissolving the dozens of individual corps. Lost some perks, but made life a whole lot simpler on the margin (not to mention an improved economy of scale--do you think there is a difference in customer service with a 5 digit account as opposed to an 8 digit one?). And as I've learned from WCI in general and this forum in particular, ain't no reason you can't set up some 1099/sole proprietor situation in addition to your main gig...potentially getting the best of both worlds.
                            Are you sure OP can open solo 401k? My understanding is he is covered under the group profit sharing plan, but is not eligible to make contributions. Opening solo 401k would not be allowed I am thinking. Also, not sure they can prevent him from making employee contributions longer than 1 year see below

                            https://www.irs.gov/retirement-plans...n-requirements

                            The C-corp is another issue of course

                            Comment


                            • #15
                              Originally posted by childay View Post

                              Are you sure OP can open solo 401k? My understanding is he is covered under the group profit sharing plan, but is not eligible to make contributions. Opening solo 401k would not be allowed I am thinking. Also, not sure they can prevent him from making employee contributions longer than 1 year see below

                              https://www.irs.gov/retirement-plans...n-requirements

                              The C-corp is another issue of course
                              Re the 401k, I guess I assumed that OP is a nonpartner and hence the different treatment.

                              Comment

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