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Hello I am a contract healthcare consultant working from my

home office in Florida. I...
Hello I am a contract healthcare consultant working from my home office in Florida. I currently only have home office expenses as I work exclusively from my house, but in the future I may have to travel to client sites and spend money on advertising etc. I have been offered a side contract to work on and I need to find out what is the best tax minimization approach for current and future contracts. Should I start a single person LLC, SCorp or just be a sole proprietorship? I do know someone doing the same work that I could partner with if there is major tax savings that way. This year I will earn 195,360.00 before expenses from my existing contract and the new contract will be an additional $13-19K (before taxes) this year and possibly more next year. I am married with 2 dependents but my wife and I have been filing taxes separate because she has massive student loan debt and was very sick -unable to work. So filing separate was the only way for her to get in the IBR government plan. However, this year if there is enough tax savings I can make her payments and file married together if recommended given my overall situation. Thank you for the advise
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Answered in 2 minutes by:
9/21/2013
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Megan C :

Thank you for your question, and thanks for using JustAnswer.com.

Megan C :

To minimize your tax, you would be better suited to file as an S Corp.

Megan C :

Under an S Corp you pay yourself a "reasonable" salary, and that's the only amount of income that you have to pay employment taxes on.

Megan C :

With a sole proprietorship you have to pay these taxes on 100% of your profits

Megan C :

You can have S Corp treatment one of two ways: One, you start a corporation and elect S Status, or two you open an LLC and elect to be taxed as an S Corp.

Megan C :

Either way you get the same treatment.

Megan C :

Now, the very important thing to remember about S Corps is that you will have to file a return annually, even if you have no income or expenses

Megan C :

If you dont there are steep penalties.

Customer:

hello

Megan C :

How are you today? Have you been able to receive the rest of my response?

Customer:

yes i did i am reviewing now. is the LLC as an Scorp the easiest and fastest way? I have to sign the contract next week so i want something quick and easy. Also, as an Scorp should I be the only worker/owner or should, i have my wife, child etc. as the partners or should i get a outside partner? thank you

Megan C :

The LLC has the greatest ease of formation, and it's easier to stay in compliance with laws. You don't need a partner - you can be the only owner/shareholder

Customer:

ok so i will start LLC as Scorp.. would i get a SCorp TIN or LLC TaxID? Should I get that via the state of FL or Nevada?

Megan C :

You apply for an EIN as an LLC. I would also open in Florida, as that's your state of residence

Customer:

ok great! last questions :) the recommendation is 60% salary and 40% dividend on the Scorp- correct?? I would also need to get business license?

Megan C :

That's correct. You've done your research. Both are correct.

Customer:

wonderful thank you megan. unless there is anything else you think i should know you have answered my questions wonderfully ;)

Megan C :

I'm glad I could help. If you would, before leaving, please rate my response as "excellent" so that I may receive credit for assisting you today

Customer:

will do take care

Megan C :

You're welcome

Megan C :

Have a great day

Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16,581
Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
Verified
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Customer reply replied 4 years ago


i forgot the most important question!! the main contact this year (the 200K job) is w2 (because I di dnot have a comp set up when I started).. so should I just do sole prop until next year?

Thank you for your follow up. Yes, based on that follow up it would make sense to be a sole proprietor until next year, and then start your s corp.

Thanks again for using JustAnswer.com.
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Megan C
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16,581
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Experience: Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

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