S-Corp Question

[tyrionlannister00]

Hey everyone, yes I am talking to an accountant. My question though I wanted to ask because I'm not 100% sure the accountant is just trying to get my business for this tax year!

So the story is: I'm moonlighting in 4th year as a resident. I'm currently getting a W-2 from my moonlighting job. I make about 3,000 per month at the moment. This means for the rest of the year, I will probably make about 12,000 - 15,000 in potential earnings.

I was told by several attendings I should have a P.A. and make it an S-Corp in order to reap the benefits. OK, I get that, I understand. My question is... with this tax year ending soon, I'd be looking at just the 15K in potential earnings where all this magical S-Corp deductions and wage vs distribution will come into play.

The accountant tells me I could save a bunch this year just with deductions and that I wouldn't have to worry about paying myself a salary if I made myself an S-Corp because I'd be deducting all my expenses. I don't quite understand that... everything I read online says I should pay myself a reasonable salary. On top of that, his fee is $750 at tax time for the s-corp taxes. Perhaps, I didn't understand him... he literally told me to open a business account, and keep track of my expenses so that we can go over my deductions later. He didn't tell me to pay myself a wage or anything, the way I understood it, we would figure out all the details come tax time. Is that ok?

My question: is it worth it to do this year for the 15K salary I will make in the next 4 months?? I feel like the $750 the accountant will charge kinda negates my savings with so little in income.

Thanks in advance!

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[deleted480308]

Just sat through a presentation with a finacial advisor who talked about moonlighting residents paying themselves a small salary out of their company (I think he was talking lesser of $30k or 30%). He did say to be careful about deductions though, don't get too greedy and draw attention by blurring the lines of what's actually allowed (no, you can't write off your entire house or your kids school etc).


Whether it's "worth it this year" comes down to you continuing to do it or not next year. If you are then you remove the start up costs from consideration because you're doing it anyway. The only cost the calculate then is the actually tax filing fee off your corp, if that's more than the expected savings you might wait till january.

 

[SigmaFS]

In a word - No. The benefit of forming a Professional Association then electing it to be treated as an S-Corp is the avoidance of some payroll tax. Keep in mind the IRS standard is that you must pay yourself a W2 income reasonable for your position, after which, distributions (not subject to payroll taxes) are issued. Also note that relevant business deductions can be claimed on Schedule C with 1099 income. So, you have the added expenses of forming the business entity, filing an S Corp return (1120S), $800 minimum CA FTB (if in CA) tax, payroll service, S Corp accounting and compliance, etc - no, not this year.

 

[ThoracicGuy]

Hey everyone, yes I am talking to an accountant. My question though I wanted to ask because I'm not 100% sure the accountant is just trying to get my business for this tax year!

So the story is: I'm moonlighting in 4th year as a resident. I'm currently getting a W-2 from my moonlighting job. I make about 3,000 per month at the moment. This means for the rest of the year, I will probably make about 12,000 - 15,000 in potential earnings.

I was told by several attendings I should have a P.A. and make it an S-Corp in order to reap the benefits. OK, I get that, I understand. My question is... with this tax year ending soon, I'd be looking at just the 15K in potential earnings where all this magical S-Corp deductions and wage vs distribution will come into play.

The accountant tells me I could save a bunch this year just with deductions and that I wouldn't have to worry about paying myself a salary if I made myself an S-Corp because I'd be deducting all my expenses. I don't quite understand that... everything I read online says I should pay myself a reasonable salary. On top of that, his fee is $750 at tax time for the s-corp taxes. Perhaps, I didn't understand him... he literally told me to open a business account, and keep track of my expenses so that we can go over my deductions later. He didn't tell me to pay myself a wage or anything, the way I understood it, we would figure out all the details come tax time. Is that ok?

My question: is it worth it to do this year for the 15K salary I will make in the next 4 months?? I feel like the $750 the accountant will charge kinda negates my savings with so little in income.

Thanks in advance!

Set up a solo 401k and contribute your money there. You wouldn't need an SCorp for that.

 

[PlutoBoy]

Hey everyone, yes I am talking to an accountant. My question though I wanted to ask because I'm not 100% sure the accountant is just trying to get my business for this tax year!

So the story is: I'm moonlighting in 4th year as a resident. I'm currently getting a W-2 from my moonlighting job. I make about 3,000 per month at the moment. This means for the rest of the year, I will probably make about 12,000 - 15,000 in potential earnings.

I was told by several attendings I should have a P.A. and make it an S-Corp in order to reap the benefits. OK, I get that, I understand. My question is... with this tax year ending soon, I'd be looking at just the 15K in potential earnings where all this magical S-Corp deductions and wage vs distribution will come into play.

The accountant tells me I could save a bunch this year just with deductions and that I wouldn't have to worry about paying myself a salary if I made myself an S-Corp because I'd be deducting all my expenses. I don't quite understand that... everything I read online says I should pay myself a reasonable salary. On top of that, his fee is $750 at tax time for the s-corp taxes. Perhaps, I didn't understand him... he literally told me to open a business account, and keep track of my expenses so that we can go over my deductions later. He didn't tell me to pay myself a wage or anything, the way I understood it, we would figure out all the details come tax time. Is that ok?

My question: is it worth it to do this year for the 15K salary I will make in the next 4 months?? I feel like the $750 the accountant will charge kinda negates my savings with so little in income.

Thanks in advance!

I have done something similar to what your accountant suggested including having a business account to track expenses. Made things easier come tax season.

 

[dpmd]

Not sure why incorporating would make any difference if you are being paid as an employee (you said W2) for your moonlighting.

 

[Stroganoff]

Not sure why incorporating would make any difference if you are being paid as an employee (you said W2) for your moonlighting.

What I was thinking too.