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PSLF + S Corp = Mutually Exclusive?

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  • PSLF + S Corp = Mutually Exclusive?

    Hi everybody,

    I've been going for PSLF since my intern year in residency and have just over 5 years of payments left. Since graduating from residency I've been working as a 1099 contractor for a county hospital. Friends who are also 1099 contractors in medicine and others who work in finance keep telling me that I should incorporate and set up an S Corp, telling me that it will be more tax efficient, save me money, etc. I won't even pretend to know all the details of incorporating, but I read WCI's old post on it and came away thinking it's not worth it.

    My question is, if you were to set up an S Corp, or something like it, would you still qualify for PSLF? It is my (limited) understanding that an S Corp could be argued to be a for-profit entity. Therefore, despite working for what is technically a non-profit institution (e.g. county medical system), you would likely be disqualified from loan forgiveness. Is this line of thinking sound? Would love to hear from anyone who has thoughts on this or a better understanding of incorporation etc. and how it might affect PSLF. Thanks in advance!

  • #2
    Here is the link to the article I referenced above:

    https://www.whitecoatinvestor.com/incorporating-to-reduce-liability-and-to-save-taxes/

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    • #3
      Interesting question and one I've never been asked. I would recommend not incorporating. The minimum taxes you save (if any) will likely be offset by the additional compliance costs (filing a separate corporate tax return, paying yourself as an employee, all the payroll reporting requirements including paying unemployment taxes on yourself). A doctor who has been convinced to form an s-corp has not, I believe, received good advice. And there is the issue of PSLF. Technically, you would no longer be working for the NPO. No way would I risk that without a solid agreement in writing. Even then I would be uncomfortable as your loan forgiveness is granted at the national - not local - level.
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4
        This is the prevailing wisdom for some reason, I think tax laws must have been different before and gave some incentive towards formation. Everyone told me the same, but after reading several books and looking at taxes, time, etc...I couldnt find a reason to do so (and its expensive in Cali as well). You are essentially treated the same, and there is no liability protection whatsoever from the only risk you're worried about.

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        • #5
          Agree that is an interesting question.  The benefits of S-corp are fairly small, particularly if you are not in a very high paying specialty or dual-income.  Easiest thing would be to stick with sole proprietor.  Disagree with jfox above, I think s-corp can be beneficial and worth the trouble but it depends on your income level.

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          • #6
            Thank you everyone for your replies! I have had no plans to incorporate and ditch sole proprietorship, but this is very helpful information and thoughts to consider for anyone who is thinking of incorporating---especially those wishing to concurrently pursue PSLF.

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            • #7


              Disagree with jfox above, I think s-corp can be beneficial and worth the trouble but it depends on your income level.
              Click to expand...


              I should clarif. I was addressing this solely from the viewpoint of a sole practitioner, which is what remapthesoul was asking about. But I made a blanket statement and that was incorrect. If you are truly paying yourself a salary comparable to others in your specialty and location, technically, there should be little or no profits left beyond the payroll so, imo, the benefits for a SOLO are not there. For an office with several employees (OM, aid, nurse practitioner, junior attending who is not an owner, etc.), an S-corp could very well be beneficial.
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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