self employment tax

[operaman]

A couple of year ago I moved from solo practice with an S corp MDPA to W2 employee with a hospital system

Base annual salary is a little over 300K; with productivity bonuses, I estimate another 50 to 100 k; I have the option of taking upto 49% of my compensation on a 1099, something I have not exercised due the fact that I would be responsible for the self employment tax on the 1099 income.

The advantage of taking a portion of my income on a 1099  would be

1) ability to deduct more business/profession related expenses

2) ability to form and contribute to a solo 401k

Since I would already be paying the max social security tax on the W2 income, would I have to also make soc sec tax payments on the 1099 income and would this be refundable as an overpayment? ( I understand I would be still liable for the medicare tax which has no income ceiling)

[spiritrider]

Schedule SE takes into account any W-2 box 5 Social Security (SS) wages. So if that amount exceeds the SS max wage base ($127,200), then there will be no SS component included in the SE tax.

You will be responsible for any Obamacare Medicare surtax due. However, this is not done on Schedule SE, rather on Form 8959 and Form 1040 line 62.

There is no need to refund excess SS taxes unless there are multiple W-2 employers. In that case only the employer share is refundable. The employer share is never recoverable. This is why it is counter productive for someone in such a situation to have an S-Corp.

 

[silverpaw54]

I have a few part-time gigs. My main gig is a W-2 employer. One part-time gig is a W-2 as well, but I get SS taken out. SS is no longer being taken out with my main gig which I have been working at throughout the entire year. I just assumed I will get a refund of the excess SS taxes as they told me that was my only option. However, is it employee share that is refundable and not the employer? I am not sure if that is a typo. I imagine if the employer share is not refundable, then it is the best interest of myself and the company to fix this.

[operaman]

Thank you Spiritrider! From here and on another thread I concluded that I would not be paying excessive SS tax on 1099 income.The only extra cost would be the employer part of Medicare tax, but allowing for the ability to take business deduction and a solo 401k, this should be a small amount. In my specific situation above, then I decided to receive the maximum percentage i.e. 49 % as 1099 income and 51% as w2 income

[jfoxcpacfp]

spiritrider wrote:

In that case only the employer share is refundable. The employer share is never recoverable. This is why it is counter productive for someone in such a situation to have an S-Corp.

Click to expand...

I think @spiritrider meant the employee share is refundable. Your point is well-taken re: the s-corp.

[spiritrider]

Yes, that was a pretty bad typo. Excess employee SS deductions are refundable on your personal Form 1040.

The excess employer SS is never recoverable. That is why it is not advised to use an S-Corp for moonlighting businesses when exceeding the SS max wage base. You are the employer.