1099 vs s corporation

[doconc]

Hi,

 

I am currently a fellow. I have W2 income of 60k per annum. I also have 1099 from moonlighting. I expect total income from 1099 to be 90k around this year. Shall I open S corporation? next year I will not have any 1099 income though.

 

please advise.

 

thanks

[The White Coat Investor]

I'm not hearing a reason to start an S Corp, and that's from a guy who opened a letter from the IRS yesterday telling him he was now an S corp.

You might want to get an EIN and open an individual 401(k) though, but hard to say without more info.

You might like this post:

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

[jfoxcpacfp]

doconc wrote:

I am currently a fellow. I have W2 income of 60k per annum. I also have 1099 from moonlighting. I expect total income from 1099 to be 90k around this year. Shall I open S corporation? next year I will not have any 1099 income though.

Click to expand...

NO. Make sure your malpractice covers you, though. An s-corp will not protect you from liability for your mistakes at work and the administrative cost will far outweigh any tax savings. You'll have to set up payroll for yourself and file a corporate income tax return, pay setup/annual fees in whatever state you incorporate, and keep a more complicated set of records. File as a sole proprietor and be done with it. My personal threshold for setting up an S-corp if you have no other employees is around $300k - $400k of gross income, depending on facts and circumstances.

On a side note, you might want to contribute 20% to a SEP and roll into your 401k so you can do future backdoor Roth conversions. You have until 10/15/17 to do so (until you file your tax return). You had to set up a 401k by 12/31/16, so that door is closed.

I strongly recommend you have a competent CPA prepare your return this year.