Announcement

Collapse
No announcement yet.

Costs for setting up and maintaining S-corp?

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Costs for setting up and maintaining S-corp?

    I am currently an independent contractor (just me, no other employers) just finishing my first full year out of residency. I am currently a sole proprietor but have started looking into potentially changing my taxing filing status to an S-corp (Pennsylvania). I’ve ready enough on this forum to know that the main benefit is to save on Medicare taxes (will max out SS on physician salary) on the portion that is a distribution. In general, for every 100k in distribution you can save 2-3k in taxes. Many have said that you should have at least 300-400k in 1099 income for it to even be worthwhile. Last year I made around 625k as 1099 income. Expecting similar to slightly increased amounts for 2020.

    My question is how much extra does it cost for the extra tax forms, setting up payroll, etc… I’ve read WCI article
    (https://www.whitecoatinvestor.com/ll...-as-an-s-corp/) and this gives me an idea of some of the forms and hassle factor, but I didn’t see anything regarding costs. WCI is generally a DIY kind of individual when it comes to his tax preparation. In my case, I currently don’t do my own taxes so I certainly would be outsourcing the effort as things only became more complicated. I know a lot of tax professionals have retainer fees given there is ongoing tax planning in addition to tax preparation so comparing fees to what I am currently getting (just once a year tax form prep since residency) is an apples to oranges comparison.

    I’m just trying to evaluate all of the costs involved if I plan on making the switch and essentially want to be relatively/mostly hands off. How much does payroll cost, additional tax form preparation, are the retainer fees (I’ve seen 4-10k/year) worth it, etc…

    If the savings significantly outweigh all the cost, then sure it is worthwhile. And the higher the 1099 income, the higher the medicare savings (and possibly some other savings I'm sure that I'm missing), but I just don't have a good idea what it would cost to implement and run such a scenario.

  • #2
    Did you ask your CPA? They should also be able to run the numbers for you re: MCR tax savings

    Comment


    • #3
      For perspective, here is our fee schedule (minimum costs). Don't bank on this from the next CPA or even from the next physician you compare rates with. Fees vary greatly across the US (as, also, does competent, timely advice!)

      As for payroll, our fees are definitely higher than Gusto and other services, which require a little more of clients' time, but not significantly, impo. Some clients want all at in same place and hands off as possible, others want the lowest fee (as long as the work is correct). A CPA firm should do a fine job - but so will Gusto.
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

      Comment

      Working...
      X