Sole prop vs S-corp in California

[Sikhest_Soldier]

Hey everyone, I am a PM&R doc in California and I need help deciding how to structure my 1099 income for 2023. I am married with two kids, wife makes about 50k as a part time teacher.

My W2 income is 339k

I have been picking up 1099 work in nursing homes, in 2022 I was a Sole Prop and I made about 90k. This year (2023) it looks like I am on track to make closer to 200k in 1099 income. I was told by my CPA that it may make sense to set up a S-corp for this 1099 income. He said it would increase complexity, paperwork, and I would have to have someone help me set it up but would save me some amount of money in the end. I am wondering if any other docs in California can comment on their experience and if they think this would be a good idea or just stick with Sole Prop. Thanks

[spiritrider]

Find a different CPA, yours is fundamentally incompetent. This is an epic CPA101 failure.

An S-Corp for moonlighting 1099 income when you have other W-2 wages >= the SS MTE (2023 = $160,200), is counter-productive. You will pay far more net FICA taxes than SE taxes you would pay as a sole proprietor. Not to mention in CA, there is an additional 1.5% franchise tax for S-Corps.

[jfoxcpacfp]

100% agree with SR. I make an effort to be understanding when a CPA simply gets out of their wheelhouse but this is a pretty bad piece of advice. Too many CPAs (and doctors) assume s-corps are business owners’ nirvana. Well, they’re not. Same deductions, more complexity, more cost and, as SR said, in your case, additional costs due to FICA doubling. Plus, CA is the worst state to set up an s-corp if you’re not earning enough (which you aren’t). That’s not the way I like to find business deductions.

Welcome to the forum!

[PJsAllDay]

I was under the impression that the ability to do a SALT cap workaround was a worthwhile part of doing the extra 1099 work through a corporation. Is this not the case?

[jfoxcpacfp]

I was under the impression that the ability to do a SALT cap workaround was a worthwhile part of doing the extra 1099 work through a corporation. Is this not the case?

It can be but it’s not automatic. You still have to run the numbers. In this case, no.

ps - I love your username!

[StarTrekDoc]

If your side gig numbers increase, I would definitely think about the SALT benefit to see where the financial breakeven would be

Ftb is pita too so take that into account