New 1099 Side Gig Advice for a W-2 Physician

[icarus8]

Hello friends,

I am writing to see if the wise minds here can assist me in taking some steps for tax reduction in my circumstances.

I am a full-time salaried W-2 physician. I make about 320K. I have a 403b, to which I max out my contributions, and my employer matches those. In addition, I have a 457 which I also max out. I usually do a backdoor roth each year of 5500.

I am starting a side gig which will be paid on 1099, and I expect to make 35-50K through this income.

I'm trying to ascertain what moves I should make here to minimize tax burden. (In addition, my main job is 501c3 and I'm on track for PSLF, so lowering my AGI will also help me lower my loan payments, which is ideal given PSLF plan). After doing my research here and elsewhere it seems that I:

1. Should get an EIN (done). Easy.

2. Should make estimated tax payments (or just increase the withholding on my main job) to avoid penalties? Is this accurate?

3. Should look at a solo401k (not a SEP IRA due to pro rata issues) - which I have some questions about. I believe I have maxed out my "employee" contributions with my mainline job. So if my reading is correct, I can only put 20% of my income (after some kind of self-employment tax) into this account as "employer" contributions, correct?

4. Should deduct various deductions (I have a spare room which I will use as a home office and can deduct, travel, etc).

5. Do I need to pay self-employment tax? What is this and who needs to pay it? anyone on any 1099? I couldn't find a good answer to this.

Anything I have wrong here or doesnt apply? Or anything I've forgotten/missed? Much of the resources (especially for solo401k) applied to 1099 only earners...

Thanks in advance!

[I Find This Humerus]

Wow, what kind of side gig pays you 50k assuming it's not that time consuming? i.e. how do you have so much free time to make an extra 50k? Are you part-time?

[icarus8]

I Find This Humerus wrote:

Wow, what kind of side gig pays you 50k assuming it’s not that time consuming? i.e. how do you have so much free time to make an extra 50k? Are you part-time?

Click to expand...

Well I work nights and get a solid hours reduction for doing so.

It's telehealth stuff, and I put in about 10 hours/week, and make about 120/hr. Some variability in there.

[Faithful Steward]

I would recommend reading the following WCI article before making decisions on how to structure your Solo 401(k). Pre-tax contributions may not be the best idea. You may want to structure the plan to allow Mega Backdoor Roth, instead. That way you maximize your QBI deduction.

Section 199A Deduction (QBI) and Retirement Accounts

https://www.whitecoatinvestor.com/section-199a-deduction-qbi-and-retirement-accounts/

[I Find This Humerus]

Faithful Steward wrote:

I would recommend reading the following WCI article before making decisions on how to structure your Solo 401(k). Pre-tax contributions may not be the best idea. You may want to structure the plan to allow Mega Backdoor Roth, instead. That way you maximize your QBI deduction.

Section 199A Deduction (QBI) and Retirement Accounts

Section 199A Deduction (QBI) and Retirement Accounts

Click to expand...

"So obviously, docs, dentists, attorneys and basically the main business for my entire target audience is specifically excluded."

[spiritrider]

Keep in mind that 403b annual additions (employee + employer contributions) must be aggregated with the annual additions of any employer retirement plans of businesses > 50% owned by the 403b participant.

For 2019, that means total one participant 401k (employee + employer contributions) are limited to $56K - (403b employee + employer contributions).

[Faithful Steward]

I Find This Humerus wrote:

“So obviously, docs, dentists, attorneys and basically the main business for my entire target audience is specifically excluded.”

Not excluded, limited. But, good tax planning can help with eligibility.

[jfoxcpacfp]

You really need to work with a CPA.

1. check


2. you can do this either way. Talk to a CPA.


3. you can contribute 20% of net IC income (after related business deductions) and after 1/2 SE tax. Since you have a 403b at work, you can contribute no more than the aggregate of $56k between the 2 accts.


4. yes, see #3 answer


5. yes

I Find This Humerus - it is very common for docs to make this amount with side locums work or an extra weekend a month at a 2nd hospital, taking call, etc.