Locums tax advice

[taggart]

Hi all,

Long time reader, first time poster. I would really appreciate if the kind folks on this forum can point me in the right direction.

I recently completed fellowship training and am starting a full time gig in Florida next week. I had some time off after training and worked a locums gig also in florida. I was paid as a 1099 contractor and no tax was withheld. I am now trying to figure out my tax liability and best way to reduce amount owed while avoiding any penalties.

Background info -

-Married, no dependents. Wife is self-employed (starting art business) and no income as of now.

-Locums pay was ~21,000. Of that 10k was used to pay off credit cards, 5k as gift to parents to help with some home renovation. 5k in savings account

- Fellowship salary was ~60k/annual, will get attending salary mid-august to end of year. Pay will be ~20k/month pre tax.

- Company offers 403b and 457. 403 has match that vests over 3 years. Plan to put 7% of paycheck into that (will not max first year, but will thereafter)

My main questions

- should I create an LLC now, or is too late since the 1099 pay already came through. Do I need an LLC to create a SEP-IRA or can I go ahead and fund that now from my savings account?

- Am I required to make quarterly payments to IRS at this time from a single locums gig? I do plan to continue working locums in future but no set dates yet.

- My current tax plan was to increase witholding from my current paychecks and put some money aside for the large tax bill next year?

I appreciate any/all advice.

Thanks!

 

 

 

[jfoxcpacfp]

taggart wrote:

– should I create an LLC now, or is too late since the 1099 pay already came through. Do I need an LLC to create a SEP-IRA or can I go ahead and fund that now from my savings account?

Click to expand...

Too late now, but you don't need it. Since the locums co. would have covered you under a malpractice policy (they did, right?) there is nothing beneficial about having an LLC. You can set up and fund a SOLO-k (don't recommend a SEP) and keep your business open (along with the SOLO-k) as you may choose to do some locums or side IC work in the future. Then you can r/o any retirement savings from your fellowship employment to the 401k and contribute to a backdoor Roth IRA, tax-free, in the future.

taggart wrote:

– Am I required to make quarterly payments to IRS at this time from a single locums gig? I do plan to continue working locums in future but no set dates yet.

Click to expand...

Not necessary for this year. You'll either owe taxes next April or you can increase your withholding enough to cover through your new employer.

taggart wrote:

– My current tax plan was to increase witholding from my current paychecks and put some money aside for the large tax bill next year?

Click to expand...

See above. You'll be able to deduct some business expenses against your locums receipts. Probably in your best interests to hire an experienced CPA.

[taggart]

Thanks for the valuable info

To clarify- I can open a solo 401k and put in upto my max (18k) and that will reduce my overall tax burden. So if I put in 10k now, I only have to show the remainder of locums earnings as taxable?

My residency/fellowship retirement accounts were tax deferred (401k) , how can I rollover to Roth without paying the due taxes?

Agree with you- am looking at CPA's near me but hard to figure out who is good. Will ask some work colleagues. Do you contract clients online?

Also is there a solo 401k you recommend?
Thanks again

[Peds]

- you open a solo 401k but your total employee contributions can only add up to 18k. so if you saved anything in residency this year make sure you account for that. you can add employer contributions however up to 53K.

- you cant haha. thats the point of pre tax and post tax. you can minimize the tax if you are in a low tax rate. but just leave it and roll it into your new solo 401k.

- fidelity

[MPMD]

taggart wrote:

Thanks for the valuable info

To clarify- I can open a solo 401k and put in upto my max (18k) and that will reduce my overall tax burden. So if I put in 10k now, I only have to show the remainder of locums earnings as taxable?

My residency/fellowship retirement accounts were tax deferred (401k) , how can I rollover to Roth without paying the due taxes?

Agree with you- am looking at CPA’s near me but hard to figure out who is good. Will ask some work colleagues. Do you contract clients online?

Also is there a solo 401k you recommend?
Thanks again

Click to expand...

There is a blog post w/ like 500 comments on this, in your case it's actually probably work glancing through! I did and it helped me.

Quick and dirty:

401k can have EMPLOYEE and EMPLOYER contribution.

if you work as an attending for University Hospital and "max out your 401k" like everyone says you are maxing out your EMPLOYEE contribution. University can then match you into that same account as your EMPLOYER.

but if you moonlight as IC on the side at Community Hospital you are both the EMPLOYEE and the EMPLOYER b/c Community is basically hiring a staffing company of 1 person. even if you have maxed your 401k at University you can make EMPLOYER contributions to a solo-401k up to about 20% of your gross. I use fidelity and you literally just write your name as both employee/employer and write the contribution number in the employer box.

at 20k total you'd have to decide if it was worth the trouble. i think most of us on this forum would say absolutely. if you just make a few grand with a couple of shifts maybe not.

[jfoxcpacfp]

taggart wrote:

Thanks for the valuable info

To clarify- I can open a solo 401k and put in upto my max (18k) and that will reduce my overall tax burden. So if I put in 10k now, I only have to show the remainder of locums earnings as taxable?

My residency/fellowship retirement accounts were tax deferred (401k) , how can I rollover to Roth without paying the due taxes?

Agree with you- am looking at CPA’s near me but hard to figure out who is good. Will ask some work colleagues. Do you contract clients online?

Also is there a solo 401k you recommend?
Thanks again

Click to expand...

You can contribute a maximum $18k employee contributions to all of your retirement plans (401k, 403b) combined. So, if you contribute $10k at your new job, you will be able to contribute only $8k to your solo-k. You can also contribute 20% of net profits from locums to your solo-k. That is considered the employer contribution. iow, you are both employee and employer when you are self-employed.

You need to consider your employer match, also. You want to contribute enough to the 401k at your new job to get the maximum employer match for 2017, assuming there is a match for the 1st year (often not).

You cannot move your fellowship 401k to a Roth w/o paying taxes (called a "conversion"), but you should consider doing, as this is your last year in a relatively low tax bracket. Again, tax planning can help. If you do not want to or cannot afford the taxes, then you can r/o all or part of your 401k to your new solo-k. Keep in mind, however, that you have until next Oct 15 to "recharacterize" any Roth conversions, so I would convert all and then recharacterize if you can't pay the tax bill or if the market dips after you convert.

You should set up your solo-k with a custodian that will accept incoming rollovers and offers a Roth component. We custody with TDAmeritrade.

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