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Moonlighting....is there a reason to form an LLC?

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  • Moonlighting....is there a reason to form an LLC?

    I'm going to start doing some moonlighting getting paid on a 1099 as an independent contractor. It's just a side job, and will likely be a couple of days each month.

    My question is this...is there a large benefit to setting up an LLC and having the locums group pay my LLC rather than me personally? Does this help come tax time to find ways to write off business expenses (unreimbursed travel, airfare, etc.)? I imagine I can still do these business tax write offs on my own with little headache or stress, but I'm wondering if having an LLC helps keep the bookkeeping easier, etc..

    When it comes to tax writeoffs for moonlighting, what have people been claiming? I fly. Can I write off rental fees, keeping instrument current, hanger fees, etc.? More basic, can you write off a portion of your car if you use that for travel? I need a cell phone to take call; is that now a full write off as well?

    Thanks for everyone's input...I know that I should consult a tax professional and I'm planning to do so. I just wanted to hear from the group what people have experienced.

  • #2
    [Post deleted at author's request.]

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    • #3
      A common misconception is that the purpose of forming an LLC is for tax write-offs. You can deduct the same expenses with our without an LLC. LLC stands for "Limited Liability Company" and the reason for forming one is to limit liability. Given your fact pattern, I see no reason for an LLC unless you are seeing patients at your house or meeting business associates at your house, driving them in your car, etc.

      As for deductions, they are very specific and personal to your IC work. You can read any number of books listing generic deductions, but it won't replace a relationship with a professional who will advise you on the particulars of what is most beneficial to you.

      Ownership of a plane for business is a very specialized area of the tax code. It is not uncommon for doctors to do this. If you are flying your own plane to various jobs, you need to seek out a tax professional with this specific expertise as your chances of being audited will increase and you should not rely on general advice you read on a forum.

      The rule the IRS imposes for a business expense is "ordinary and necessary". I would not consider eating lunch out while you are on shift a deductible business expense.

      An LLC does not have a "Board of Directors". Owners are called "Members" and I think it a stretch to have a "Member's Meeting" with yourself "having dinner out once in a while" simply for the deduction. What would you do? Move to a seat across the table to answer the questions you've asked yourself?
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4




        A common misconception is that the purpose of forming an LLC is for tax write-offs. You can deduct the same expenses with our without an LLC. LLC stands for “Limited Liability Company” and the reason for forming one is to limit liability. Given your fact pattern, I see no reason for an LLC unless you are seeing patients at your house or meeting business associates at your house, driving them in your car, etc.

        As for deductions, they are very specific and personal to your IC work. You can read any number of books listing generic deductions, but it won’t replace a relationship with a professional who will advise you on the particulars of what is most beneficial to you.

        Ownership of a plane for business is a very specialized area of the tax code. It is not uncommon for doctors to do this. If you are flying your own plane to various jobs, you need to seek out a tax professional with this specific expertise as your chances of being audited will increase and you should not rely on general advice you read on a forum.

        The rule the IRS imposes for a business expense is “ordinary and necessary”. I would not consider eating lunch out while you are on shift a deductible business expense.

        An LLC does not have a “Board of Directors”. Owners are called “Members” and I think it a stretch to have a “Member’s Meeting” with yourself “having dinner out once in a while” simply for the deduction. What would you do? Move to a seat across the table to answer the questions you’ve asked yourself?
        Click to expand...


        I am looking at a similar situation.  I often have business expenses throughout the year that do not amount to 2% of my income and so I cannot redeem any tax's.  Is there a minimum for deductions in an LLC?

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        • #5
          To add to Johanna's post, an LLC is a state chartered business entity that has no impact on federal taxation. It either defaults to self-employed status or you can elect S-Corp treatment.

          What are these business expenses? If they are un-reimbursed W-2 employee business expenses, then they can only be deducted on Schedule A subject to the 2% exclusion.

          Business expenses can only be deducted by another bona fide business against the business receipts of that business not expenses from your W-2 employment.

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          • #6
            Much of the expenses this year was travel, about 3k worth.  Also a considerable amount of paperwork, FedEx/Kinkos, licensing documents to about $500.  These were not on my W-2.

            There is much I need to learn in this area so if you have any book suggestions let me know.  I know there are probably a number of forum posts but any suggestions for organized concise expositions would be awesome.

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            • #7


              There is much I need to learn in this area so if you have any book suggestions let me know.  I know there are probably a number of forum posts but any suggestions for organized concise expositions would be awesome.
              Click to expand...


              With all due respect, this is similar to my asking for book suggestions on how to set a broken leg or perform a tonsillectomy just because I want to learn. While I'm not trying to say that you cannot file a tax return for your LLC properly, understanding all of the intricacies that you may run across during the lifespan of your LLC requires a body of knowledge that you cannot get from reading one of the "Dummies" books. I'm really not trying to sound snarky, although it's coming across that way, but I guess what I'm trying to say is that I would feel almost unethical telling you to read a concise book to learn about LLCs when case law pops up on a regular basis. Maybe there is one out there, I just don't know.
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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              • #8
                I disagree, I do have a manual of how to set and splint fractures and I reviewed it regularly during my first year of residency.  It helped a bunch.
                While I may not be performing all this work on my own, I still find value in learning about it.  I am interested in gaining a knowledge base that will help with my decision making, even if I am not personally dotting all the i's.

                 

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                • #9
                  I bought this book to help me understand:

                  Independent Contractor, Sole Proprietor, and LLC Taxes Explained in 100 Pages or Less


                  https://www.amazon.com/Independent-Contractor-Proprietor-Taxes-Explained-ebook/dp/B006FOE646/ref=pd_sim_351_1?_encoding=UTF8&pd_rd_i=B006FOE646&pd_rd_r=4D4GRC4FQGAMKBQMPABD&pd_rd_w=JdSef&pd_rd_wg=ilfup&psc=1&refRID=4D4GRC4FQGAMKBQMPABD

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                  • #10




                    I disagree, I do have a manual of how to set and splint fractures and I reviewed it regularly during my first year of residency.  It helped a bunch.
                    While I may not be performing all this work on my own, I still find value in learning about it.  I am interested in gaining a knowledge base that will help with my decision making, even if I am not personally dotting all the i’s.
                    Click to expand...


                    Actually, I do see your point, no reason you shouldn't learn more about it, even if you are not planning on sitting for the bar exam.
                    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                    • #11
                      If you are practicing in Kansas, you get a sweet tax break (pass through entities pay no state income tax). Other than that, not really.

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