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  • Married Filing Separately As Independent Contractor?

    EM resident here in last year of training considering wide variety of employment opportunities. Married to peds resident who will be starting a 3 year fellowship at the same time I become an attending. We both have about 200K in student loans. Mine are private (recently refinanced) at 4.25% with a 5 year payoff term once I become an attending. Her's are federal at 6.6% in IBR. Ideally we would continue filing "married filing separately" in order to keep her monthly loan payments low as she works to qualify for public service loan forgiveness. If we stay MFS, her loan payments would be ~400/month, while if we switched to MFJ they would be ~2000/month (since they would take into account my salary in their calculation). One opportunity recently presented to me is an independent contractor gig. If I took this job I would need to itemize my deductions, and, according to the rules of MFS, my wife would have to as well. The differential in our gross income would be substantial during this time (I would gross about 300K more than her while she is a fellow). Does it even make sense to take an IC job and file MFS? I am very confused as to how taking an IC job would impact our taxes if we filed MFS (i.e. her having to itemize deductions vs taking the standard deduction, etc).

    Any guidance is greatly appreciated. Thanks in advance

  • #2




    EM resident here in last year of training considering wide variety of employment opportunities. Married to peds resident who will be starting a 3 year fellowship at the same time I become an attending. We both have about 200K in student loans. Mine are private (recently refinanced) at 4.25% with a 5 year payoff term once I become an attending. Her’s are federal at 6.6% in IBR. Ideally we would continue filing “married filing separately” in order to keep her monthly loan payments low as she works to qualify for public service loan forgiveness. If we stay MFS, her loan payments would be ~400/month, while if we switched to MFJ they would be ~2000/month (since they would take into account my salary in their calculation). One opportunity recently presented to me is an independent contractor gig. If I took this job I would need to itemize my deductions, and, according to the rules of MFS, my wife would have to as well. The differential in our gross income would be substantial during this time (I would gross about 300K more than her while she is a fellow). Does it even make sense to take an IC job and file MFS? I am very confused as to how taking an IC job would impact our taxes if we filed MFS (i.e. her having to itemize deductions vs taking the standard deduction, etc).

    Any guidance is greatly appreciated. Thanks in advance
    Click to expand...


    Hard to know without more information but my guess is that yes, the IC gig would pay off. There are other considerations, too, such as the ability to contribute to a SOLO-401k, into which you could roll whatever retirement plans you have at current employment. This would preserve your ability to contribute to a backdoor Roth. You should seriously consider working with a CPA who can run the numbers and help you with tax planning. Then you would have the clarity to make the right decision.

    On another note, you might be well-served to talk to a student loan counselor. I have interviewed Joy Sorensen Navarre at Navigate and came away impressed with her knowledge and fee structure. We're planning a webinar for residents/fellows/new attendings sometime in the next few months.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      After discussing with others, it seems like maybe I am confusing terms.  If I take an IC job, I do not necessarily have to "itemize deductions."  However, it behooves me to deduct business expenses on Schedule C of Form 1099.  This way, we could file MFS and both still obtain the "standard deduction."  Am I making any sense?

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      • #4




        After discussing with others, it seems like maybe I am confusing terms.  If I take an IC job, I do not necessarily have to “itemize deductions.”  However, it behooves me to deduct business expenses on Schedule C of Form 1099.  This way, we could file MFS and both still obtain the “standard deduction.”  Am I making any sense?
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        Yes. Business expenses are not itemized deductions. You will not be limited for business deductions. You will report 1099 compensation on schedule C and will offset it with your ordinary and necessary business expenses.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Good to know.  This was the one big potential disadvantage that came to mind while thinking about this.

          I will definitely consult a CPA, however, are there any obvious disadvantages (tax, or otherwise) that come to your mind with this kind of a position?

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          • #6


            I will definitely consult a CPA, however, are there any obvious disadvantages (tax, or otherwise) that come to your mind with this kind of a position?
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            What kind of position? IC?

             
            Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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            • #7
              Yes IC.  Specifically while filing MFS.

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              • #8
                Only that you will pay more in taxes which makes sense since you are going for PSLF. Otherwise, just make sure you're covered for personal liability. If you have a home office, coordinate with your property insurer.
                Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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                • #9
                  Thanks for the nod, Johanna. Isn't the complexity of loan repayment planning amazing?!  Good work, Dilaudidopenia.

                  On a related topic:  I made a rough future projection. Once your spouse finishes her fellowship you'll want to revisit the options. It might not make sense to continue to file MFS. The alternative, because your spouse is pursuing PSLF, would be to file jointly and pay an IBR payment that's capped at the standard repayment plan amount for the final few years.

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                  • #10
                    The complexity of student loans is baffling.

                    Yes, after her fellowship, it will likely no longer make sense to be MFS

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