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Taxes first year out of residency

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  • spiritrider
    replied
    Originally posted by MollyRohenBarlow View Post
    I’m confused as how to use the 110% rule as a new attending that went from 54k as W2 to a 1099 making a much larger sum. Any 110% of the W2 income is still going to be drastically less than what I owe.
    The safe harbors are for your minimum tax payments to avoid underpayment penalties and not your tax liability for the current year. The safe harbor is 100% of the prior year's tax liability if the prior year's tax liability was <= $150K or 110% if > $150K. If you are 1099 only, you should make four equal quarterly payments (4/15, 6/15, 9/15 and 1/15 of the following year). Then you will pay the balance by 4/15. Make sure you are saving this in a principal protected account.

    You need to clarify what years and what tax liabilities.

    Leave a comment:


  • noviceinvestor
    replied
    Oh sorry misread your original post. I thought you were saying only moonlighting income was 1099. Sounds like you will be making all your attending income as 1099 in which case you will need to make estimated taxes. I think in that case for this year you could make a conservative estimate of taxes due since it shouldn't be hard to surpass 110% of your taxes from last year and then save some extra in a high yield savings account or something to pay next year once you calculate how much actual taxes are due. Should still be protected from penalties by safe harbor as far as I know.

    Leave a comment:


  • noviceinvestor
    replied
    Congrats! I'm in the same boat as you pretty much. I could definitely be wrong about this as I'm definitely no expert but based on my understanding you should be covered by the safe harbor rule. Is your new attending job paying you W2 income or 1099? If it's paying you W2 your new attending job should withhold much more than 110% of your previous years taxes when you were a resident so you shouldn't have to pay any estimated quarterly taxes. You'll just need to save up some extra money to pay the IRS next year when you calculate your taxes or you can ask them to withhold some extra money from your new attending job to account for your 1099 moonlighting job but either way you shouldn't owe any penalty thanks to the 110% safe harbor rule.

    I don't think you need to worry about the 401k deduction either, your new employer will handle deducting that from your paycheck automatically. Then next year when you're calculating taxes you will find out if you underpaid or overpaid and either get a refund or pay taxes due as usual. It may just be a larger amount of taxes due than you're used to but shouldn't be a penalty unless I'm misunderstanding the safe harbor rules.

    From the IRS website:
    "Penalty for Underpayment of Estimated Tax

    If you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year, whichever is smaller. There are special rules for farmers, fishermen, and certain higher income taxpayers. "

    Leave a comment:


  • CordMcNally
    replied
    If you're confused or unsure it's never a bad idea to get the help of an appropriate tax professional. That will give you time to continue to learn. You can run your own projections and compare to theirs. Once you feel comfortable then you can proceed on your own.

    Leave a comment:


  • ENT Doc
    replied
    I would read IRS publications on:

    1040 instructions
    Schedule C instructions
    Schedule SE instructions
    Publication on small businesses

    You can do a mock 1040 now and see what’s been withheld from your W2 from Jan-June, send in the difference.

    Are you paying for your own malpractice? Health insurance? Were you contributing to a 401k or rough equivalent while a W2?

    Leave a comment:


  • White.Beard.Doc
    replied
    Hi Molly, congratulations on being an attending!

    The simple way to do this is to save half of what you earn for taxes, knowing that it will be far less than that, so once you have filed you will know what is yours. But you will still have issues regarding late payment of estimated taxes.

    A more precise way to do this is to calculate your projected total income, then deduct withholding and then pay the remainder in estimated taxes. As your income is higher late in the year, you will get penalized for not paying estimated taxes in the first and second quarter, unless you file form 2210 to explain your situation. You may want to either find an accountant to help you now, or you may want to start doing some reading on estimated tax penalties and how to avoid them.

    Leave a comment:


  • MollyRohenBarlow
    started a topic Taxes first year out of residency

    Taxes first year out of residency

    Hey everyone,

    Looking for some tax help/understanding. Today was day one as an Emergency attending (woo!). I made ~40k extra moonlighting from January-June of 3rd year. Obviously income will increase drastically by next month. So in essence I’m trying to figure out how to start quarterly taxes. I have money withheld in a savings account from the 40k but did not start paying quarterly taxes on those. When I start paying quarterly taxes in Sept. with new attending income will that 40k get factored into it?

    I’m confused as how to use the 110% rule as a new attending that went from 54k as W2 to a 1099 making a much larger sum. Any 110% of the W2 income is still going to be drastically less than what I owe.

    Also follow up to that as well, if I’m able to max out my i401k going forward is that tax deduction factor in April 15 for the annual filing or is that considered throughout the year with quarterly taxes. Am I thinking about this wrong?

    Thoughts or suggestions?

    Greatly appreciate the help!






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