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  • Costs + Value of a tax advisor/CPA?

    Hi all,

    I am a W2 physician with significant 1099 side income. I've always done my own taxes via turbotax without issue. I also consider myself to be moderately sophisticated on tax prep, tax minimization, investing, financial planning etc. when compared to a typical physician, albeit certainly NOT advanced by this forum's high standard.

    This year, I would like to form an S-corp. I'd like to have a professional perform the incorporation, backdate it to 1/1/2022 for the 1099 income, and help maximize QBI and state specific SALT deduction cap work arounds. I'd also need help getting things set up for payroll (S-corp salary + distributions), and to file the annual business tax returns.

    I reached out to Cerebral Tax Advisors, an affiliate of WCI, and I get the general gist that it will cost me $10-30k to set up the "tax strategy", plus another 5-10K+/year to run it through them.

    They have been vague so far, saying they will show me the ROI based on what I will "save" compared to doing taxes myself. However, as I already know most of the tax minimization strategies here (S-corp, QBI, etc), I feel like I am paying a ton for very little value add.

    I just need a professional to execute this plan and make corrections where they see fit/advise. I already have done a lot of the initial leg work, and have 80-90% of the plan self-built.

    Any good recommendations for a CPA and/or tax attorney who can help me to implement, without charging through the roof?

    Or are these unrealistic expectations, and I'm in for 10k+ just to start no matter what....?

    Thanks!

  • #2
    I feel similar and don’t quite know how these advisors will do more than the standard - setup S Corp, limit salary paid to allow pass through of remaining income (save on SEP tax), and use a solo 401k ET to shelter the income. I wonder where the value add of $10-30k would be.after paying a few thousand to have a cpa set up my wife’s S Corp I looked at what they did (copy paste the articles of incorporation) and for my partner and I’d business I filed it myself (paying only for customized articles of incorporation). I’d be curious what value these advisors can add beyond standard S Corp tax strategies

    Comment


    • #3
      Originally posted by Nebulus2017 View Post
      I am a W2 physician with significant 1099 side income.

      ...

      This year, I would like to form an S-corp.
      ​​​​It is almost always counter-productive to create an S-Corp for 1099 moonlighting income. If your W-2 Box 5 Social Security wages will be > the SS maximum taxable earnings (MTE), 2022 = $147K. You will pay more in FICA taxes as an S-Corp 2% shareholder-employee than SE taxes as a sole proprietor.

      Additionally; incorporation/annual state fees, additional taxes in some states, federal/state unemployment insurance, startup/annual payroll costs, startup legal/accounting fees, annual accounting fees, significant hassle factor, etc...

      Not to mention:
      • S-Corp retirement plan employer contributions are limited to 25% of 2% shareholder-employee W-2 Box 1 wages. Whereas a sole proprietor's employer contributions are only limited to 20% of self-employed earned income (net earnings from self-employment) = business profits - 1/2 SE tax.
      • If you are eligible for the QBI deduction. An S-Corp's 2% shareholder-employee's base qualified business income (QBI) is limited to their distributions. While a sole proprietor's QBI deduction is only limited to their business profit - 1/2 SE tax - any self-employed health insurance deduction - any pre-tax employer retirement plan contributions.
      Bottom Line: You will pay significantly more costs to pay more payroll taxes, possibly make smaller employer contributions and take smaller QBI deductions if eligible.

      Comment


      • #4
        Originally posted by spiritrider View Post
        ​​​​It is almost always counter-productive to create an S-Corp for 1099 moonlighting income. If your W-2 Box 5 Social Security wages will be > the SS maximum taxable earnings (MTE), 2022 = $147K. You will pay more in FICA taxes as an S-Corp 2% shareholder-employee than SE taxes as a sole proprietor.

        Additionally; incorporation/annual state fees, additional taxes in some states, federal/state unemployment insurance, startup/annual payroll costs, startup legal/accounting fees, annual accounting fees, significant hassle factor, etc...
        .
        Spiritrider, from my limited time here I must say you have the most well informed posts and are a tremendous resource to this group (I’ve read some of your other posts/replies). If you had a spare moment could you guide me in any direction to see if there are any other tax deferral or deduction ideas for my wife’s office:

        She is solo/independent where she is the only entity in her S Corp (front office staff under separate entity) total income around 300k,
        we already maximize the pass through by reducing salary to reasonable amount , max out 401k employee and employer contributions, max out HSA, we haven’t been doing backdoor Roth but I will going forward (seeing as you then can have tax free growth vs simply placing in a cash account). Are there any ideas you have of what might be done beyond these? Ie are there any other tax deferred options after maximizing these out (pension, profit sharing (what I see is employer deduction capped at same as solo 401k match), annuity, real estate, etc)?

        thank you!

        Comment


        • #5
          Originally posted by Nebulus2017 View Post
          Hi all,

          I am a W2 physician with significant 1099 side income. I've always done my own taxes via turbotax without issue. I also consider myself to be moderately sophisticated on tax prep, tax minimization, investing, financial planning etc. when compared to a typical physician, albeit certainly NOT advanced by this forum's high standard.

          This year, I would like to form an S-corp. I'd like to have a professional perform the incorporation, backdate it to 1/1/2022 for the 1099 income, and help maximize QBI and state specific SALT deduction cap work arounds. I'd also need help getting things set up for payroll (S-corp salary + distributions), and to file the annual business tax returns.

          I reached out to Cerebral Tax Advisors, an affiliate of WCI, and I get the general gist that it will cost me $10-30k to set up the "tax strategy", plus another 5-10K+/year to run it through them.

          They have been vague so far, saying they will show me the ROI based on what I will "save" compared to doing taxes myself. However, as I already know most of the tax minimization strategies here (S-corp, QBI, etc), I feel like I am paying a ton for very little value add.

          I just need a professional to execute this plan and make corrections where they see fit/advise. I already have done a lot of the initial leg work, and have 80-90% of the plan self-built.

          Any good recommendations for a CPA and/or tax attorney who can help me to implement, without charging through the roof?

          Or are these unrealistic expectations, and I'm in for 10k+ just to start no matter what....?

          Thanks!
          Yeah thats pretty crazy expensive. Look for another CPA not trying to market to doctors..
          Once its set up you might after a few years take back over the taxes. But I haven't done that with the s-corp complexity.

          Comment


          • #6
            Originally posted by 3ztwint View Post
            She is solo/independent where she is the only entity in her S Corp (front office staff under separate entity) total income around 300k,
            Please tell me she and/or you have no ownership interest in that staffing entity. Otherwise, the two businesses would be an Affiliated Service or Controlled Group. The tax code and IRS regulations consider all members of an Affiliated Service or Controlled Group a single employer for retirement plan purposes.

            Here's hoping it is not true. Please let me know.

            Comment


            • #7
              Originally posted by spiritrider View Post
              Please tell me she and/or you have no ownership interest in that staffing entity. Otherwise, the two businesses would be an Affiliated Service or Controlled Group. The tax code and IRS regulations consider all members of an Affiliated Service or Controlled Group a single employer for retirement plan purposes.

              Here's hoping it is not true. Please let me know.
              We don’t, the front office is ran by other providers in the office (3 others) and my wife is essentially fully 1099, just collects on what she bills on minus overhead agreed costs, so we don’t own nor for hire front office staff

              Comment


              • #8
                But I suppose that makes it a deterrent for a group practice to try to classify in two groups to avoid employer sponsored retirement contributions to anyone other than providers? How is it that I know of several groups that do something of this nature? Or maybe they aren’t telling me or understanding exactly how their practice is set up? Just wondering because my friend who is a nephrologist with 3 others has a profit share that I’m 90% sure he said just goes to the physicians, but maybe it’s that they get a higher percentage on say a pro rata based on total compensation? (Ie if he’s making 400k along with the others and front office members make 40k, the MD profit share is 10:1 based on pro rata?).

                Thanks again for your input, I’m not a definitive expert on any of this, but I was almost certain MD and DDS offices I know of had employees classified in two groups or entities, but maybe the have a way that this can be done properly somehow?

                anyway, it’s irrelevant to my situation, so sorry for the sidetrack and thank you for the heads up/look out in case we had the issue of maintaining front office on our own. So if you had any suggestions, just figure 1099 independent contractor for full income, (Ie responsibility for no other employees).

                Thanks!

                Comment


                • #9
                  Cerebral tax advisors tried to sell me a 30k or so tax reduction plan that included syndicated conservation easements which is IRS listed transaction. Their subsequent yearly fee was much lower. I ended going with another CPA and am satisfied. Pay $300/mo. Includes S corp, payroll, tax strategy etc.
                  Last edited by Hoopoe; 04-13-2022, 10:01 AM.

                  Comment


                  • #10
                    Originally posted by Hoopoe View Post
                    Cerebral tax advisors tried to sell me a 30k or so tax reduction plan that included syndicated conservation easements which is IRS listed transaction. I ended going with another CPA and am satisfied. Pay $300/mo. Includes S corp, payroll, tax strategy etc.
                    This is great; I feel too often that medical professionals are preyed upon and end up getting very little value (negative value?) for many of the services offered. Now if they were able to save a multiple of the $30k year over year maybe, but much of that will simply be a one time structuring and then what work/value do they add in the future? Simply filing under the same structure with no added benefit year over year does not, in my humble opinion, justify an annualized 5 figure expense. Much of the tax gains (and in some cases potentially all) are negated by the high fees. Maybe for a surgeon bringing in 7 figures $30k is more trivial, but I would think it would still be significant

                    Comment


                    • #11
                      Spirit rider (or any others that want to chime in) if you get any additional moment could you also give your input on this: my youngest brother is finishing up ortho surg residency - if he goes private practice (ie non w2) are there tax strategies he should make sure the practice he joins has/are there any strategies you suggest? Also, I assume if he works for a health system or is W2 his hands are tied in tax deferral options as it will be limited to what the system offers? Thank you again for all your input!

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