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New attending this year paid exclusively via 1099 as I am a sole proprietor. 2018 was still a (relatively) low tax year due only being an attending for part of the year. 2019 will be a much different story as I'll be making significant money during peak earning years. My CPA currently has it setup for 2019 where automatic withdrawals from my bank account will be made for both federal taxes. This was originally setup for convenience and the 1.87% fee to pay federal taxes (Pay1040) and ~2% via credit card bonuses just didn't move the needle that much when you talk about the difference (0.13%). I also have lots of other financial items to get squared away in my post-residency life so this wasn't as big a priority.
However, one thing I forgot to really inquire about was whether the 1.87% service fee was deductible since I am a sole proprietor? If it is tax deductible, it is starting to become a little more attractive to pay via credit card.
I'm a relatively high earning physician immediately out of training. I estimate ~150k in federal tax for 2019. 1.87% of 150k = $2,805 in fees. If that is deductible and I anticipate 35% marginal tax bracket, that seems like a $981 (35% * $2,805) savings. Or essentially only paying $2805-981 = $1,824 in fees.
Couple that with putting 150k on a travel rewards card where I can get better than 2% on my return when used on travel (conservatively 2.25%), that seems like $3,375 (150,000*2.25%) worth of travel.
So, $3,375 in free travel minus the $1824 in fees = $1551 net benefit.
Essentially, my questions are...
1) Is if the service fee for tax payments are actually DEDUCTIBLE for a sole proprietor? If not, this is less compelling.
2) Is my math about right in the above scenario?
3) I've never paid my taxes this way before. I assume it's pretty easy overall, but was curious if people think it's worth it. I'm making good money now, but ~$1500 is nothing to sneeze at...especially if it's easy. That also doesn't even take into account state taxes.
Thanks for the help.
However, one thing I forgot to really inquire about was whether the 1.87% service fee was deductible since I am a sole proprietor? If it is tax deductible, it is starting to become a little more attractive to pay via credit card.
I'm a relatively high earning physician immediately out of training. I estimate ~150k in federal tax for 2019. 1.87% of 150k = $2,805 in fees. If that is deductible and I anticipate 35% marginal tax bracket, that seems like a $981 (35% * $2,805) savings. Or essentially only paying $2805-981 = $1,824 in fees.
Couple that with putting 150k on a travel rewards card where I can get better than 2% on my return when used on travel (conservatively 2.25%), that seems like $3,375 (150,000*2.25%) worth of travel.
So, $3,375 in free travel minus the $1824 in fees = $1551 net benefit.
Essentially, my questions are...
1) Is if the service fee for tax payments are actually DEDUCTIBLE for a sole proprietor? If not, this is less compelling.
2) Is my math about right in the above scenario?
3) I've never paid my taxes this way before. I assume it's pretty easy overall, but was curious if people think it's worth it. I'm making good money now, but ~$1500 is nothing to sneeze at...especially if it's easy. That also doesn't even take into account state taxes.
Thanks for the help.
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