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How to handle 1099 income

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  • How to handle 1099 income

    I recently starting doing some consulting work as a 1099 independent contractor.

    My main question is, is there any benefit to forming an LLC or s corp for this work?

    I do not anticipate making substantial amounts of money, maybe $10k a year.

    I'm not sure if I'm over thinking things either.

  • #2
    You won't save enough in taxes to justify SCorp. Not sure what utility an LLC would add. I make $30k/yr roughly in 1099 work. I keep it as sole proprietor wo LLC or S Corp

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    • #3
      You'd just be wasting time to form an LLC and you'd be wasting money to form an S-corp.

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      • #4
        Okay, good to hear. That is what I was thinking. Like I said, I don't plan to make a living off of it. It'll just be a side gig for extra wine money.

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        • #5
          Originally posted by GEAUXT View Post
          Okay, good to hear. That is what I was thinking. Like I said, I don't plan to make a living off of it. It'll just be a side gig for extra wine money.
          Might I recommend Carlo Rossi and you can stretch that budget further…

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          • #6
            What about for asset protection from litigation?


            And what if 1099 income was more to the tune of 50-100k/year? Would using an s-corp as a pass through entity then make some sense?

            I am facing this issue right now. Thank you.

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            • #7
              Originally posted by Gavanshir View Post
              What about for asset protection from litigation?


              And what if 1099 income was more to the tune of 50-100k/year? Would using an s-corp as a pass through entity then make some sense?

              I am facing this issue right now. Thank you.
              LLCs, especially in medicine, typically don’t provide the protection people think they do.

              An S-Corp still wouldn’t make sense in your situation unless you hate money.

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              • #8
                To amplify what CordMcNally was alluding to. If you already reach the SS maximum taxable earnings (2021 = $142,800) through your primary job. An S-Corp will actually cost you more in net FICA taxes than SE taxes you would pay as a self-employed individual.

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                • #9
                  Originally posted by spiritrider View Post
                  To amplify what CordMcNally was alluding to. If you already reach the SS maximum taxable earnings (2021 = $142,800) through your primary job. An S-Corp will actually cost you more in net FICA taxes than SE taxes you would pay as a self-employed individual.
                  Not to mention CPA fees, payroll fees (including unemployment taxes!), potential loss of 199a deduction, complexity, etc. For all those reading this who are also questioning an s-corp and earning ~$400k+, I would hazard a guess that ~5% of our clients in this situation use an LLC or S-corp, and all of them brought them along when they became clients. These clients set up an S-corp/LLC on 2nd-hand advice.

                  The 3 reasons reasons to use an S-corp in a fact pattern similar to the above are:
                  1. If you have an employee who could attach liability to you through their acts as an employee
                  2. To save Medicare taxes (but, as mentioned almost universally above) will have offsetting costs that s/b considered
                  3. To benefit from SALT deductions in the states that have added this benefit (and this is typically a relatively low benefit).
                  Of course, there are other uses in more sophisticated situations, such as when other owners are involved, for estate planning, and when required by the mothership partnership in CA, but n/a for these purposes.

                  As for LLC, a professional cannot limit his/her own liability for services performed in the practice by setting up an LLC. Besides, your malpractice insurance should cover this. LLCs are for liability protection only - recommended when you own rental real estate, for ex.
                  Our passion is protecting clients and others from predatory advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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