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Creating an LLC S-corp for side gigs as a high earner on W2

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  • Creating an LLC S-corp for side gigs as a high earner on W2

    Hello,

    I am a new Radiology attending near NYC. I get paid most of my income as a W2 – a little over $400k. Aside from that, I will be earning extra income for moonlighting on the side as well as locums work as a 1099. I am hoping it will bring in an extra $50-$100k per year. I am also getting income from a high interest loan which is bringing in an additional $63k (1099-Int).

    I am trying to figure out if I should open an LLC and file as a S-corp.

    Most posts discus the differences between getting paid as a W2 or 1099, or if to file as a solo proprietor or s-corp. I haven’t come across much information regarding how to address the “extra” income when I am already a high earner as a W2.

    I was reading that it may actually cost more to file as an s-corp being that I would have already maxed out my social security tax and I will need to pay social security on my income as an s-corp. Would I be phased out of the pass-through deduction because of my W2 income, or is it a separate calculation? Could I pay myself “less” than the going physician rate on my 1099 to save on the payroll taxes? What other factors do I need to consider? How much do I need to make as a 1099 above my W2 income to make it worth creating an LLC and filing as an S corp (especially after factoring in the costs and hassle)?

    Assuming I will pay similar taxes, are there any deductions that I can make as an LLC that I can’t take as a solo proprietor (i.e. home office, second car, etc)? I know that there are other advantages like opening a solo 401k. It would be something that I would be interested in exploring. But at least for the very near future, I don’t think I would be able to max out my other retirement accounts.

    I am new to the WCI community and have only recently realized the importance of being financially savvy. I erroneously thought that once I became an attending all my financial woes will melt and I will be able to easily pay off my student loans, save, and pay for a ton of stuff. I am learning that the light at the end of the tunnel is just another larger tunnel.

    I have about $200k in student loans, $260k in a HELOC, $60k in IRA investments, $3k in a 401k. I am renting, drive a simple car, married to a PA (currently not working). I have 5 kids and expecting a 6th in a few months. My largest expense is ~$60k a year for private school (for religious reasons). Public school is not an option.

    There is a lot of wisdom and experience on WCI. Any suggesting or advice would be greatly appreciated.

  • #2
    Easy. You do not want an S Corp for this mostly because you would pay extra SS tax and much more hassle and accounting costs. And you don’t need an LLC. Just report the income on schedule C.

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    • #3
      Originally posted by jacoavlu View Post
      Easy. You do not want an S Corp for this mostly because you would pay extra SS tax and much more hassle and accounting costs. And you don’t need an LLC. Just report the income on schedule C.
      Yep.
      You can open solo 401 just as easily as a 1099 contractor regardless of incorporation (depending on the details whether you are allowed).
      If you have other questions pls ask. Not sure about that HELOC while you are renting..

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      • #4
        You have received excellent advice. Here are a couple of articles you may find useful in fleshing this stuff out to better understand the nuances of what jacoavlu and childay posted above:
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Thank you so much for your advise.

          I am trying to learn about this all as much as I can.

          jfoxcpacfp I am checking out these articles now...

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          • #6
            The articles are comprehensive and informative.

            Thank you!

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