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Chea Romine
Chea Romine, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 197
Experience:  CPA, Managing Partner of medium sized CPA firm specializing in all areas of tax and accounting.
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I am a physician who works as an independent contractor. I

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I am a physician who works as an independent contractor. I pay my own FICA. I want to be able to deduct things like auto expenses, home office, computer, cell phone, child care when I need it bc of my job, etc. Currently our household income places in the 'alternative minimum tax' catagory so these deductions dont make any differnce. I'd like to form an LLC or and S corporation so that I can deduct these expenses from my income pretax. Which is the best choice?
Submitted: 1 year ago.
Category: Tax
Expert:  Chea Romine replied 1 year ago.

Chea Romine :

First, if you are an independent contractor that receives a 1099 you are able to deduct many of those expenses on your Schedule C and will not lose them to AMT. All of the expenses you listed are deductible on your Schedule C other child care. If in the past you did not list them on your Schedule C you should look into amending your prior returns.

Now to answer your question. I agree that you should start an LLC or S Corp as they will both provide you with some liability protection which is needed as a physician. A single member LLC is taxed just as a sole proprietorship and you would report on a Schedule C. This is the simpler of the two, but can result in more tax being paid as all of the earnings will be subject to both income tax and self employment taxes(FICA and Medicare). As an S-Corp you can put yourself on salary and only that salary will be subject to income taxes and self employment taxes. The remaining profit will only be taxed as income not self employment. This can save over 15% on taxes.

There are some pitfalls: First the cost to set up and maintain an S Corp are traditionally higher than an LLC. Many times the tax savings will outweigh this so it becomes a non-factor. Secondly you must determine a reasonable salary to pay yourself so that it passes the IRS's interpretation of reasonable. There is no set in stone formula, but using sites such as salary.com or local ads for similar positions give you a basis to set your salary. You will also need to start filing payroll reports or higher a payroll company.

The direct answer is I would recommend you to become an S Corp as the tax savings is usually much greater than the costs. I would also recommend you seeking out a local CPA to walk you through the process and requirements to get you and your payroll started. They should also be able to help you with a reasonable salary. That is the way I would take my clients. Please ask any follow up questions.

Chea Romine :

You have posted the same question 3 times and have accepted them, you should be able to request a refund of 2 payments.


 

Chea Romine, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 197
Experience: CPA, Managing Partner of medium sized CPA firm specializing in all areas of tax and accounting.
Chea Romine and 6 other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Thank you. I havent figured out how to navigate this site. So I asked you three times? Good grief. No wonder I need someone else to help me with this.
Expert:  Chea Romine replied 1 year ago.
No worries you are asking the right questions and are on the right track.
Chea Romine, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 197
Experience: CPA, Managing Partner of medium sized CPA firm specializing in all areas of tax and accounting.
Chea Romine and 6 other Tax Specialists are ready to help you

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