Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

1. As an Orthodontist, independent contractor, who gets paid

on per-diem basis. How to...
1. As an Orthodontist, independent contractor, who gets paid on per-diem basis. How to analyze if a PC, S-corp, or LLC would be most beneficial in tax reduction?

2. What's the average per-diem salary for Orthodontists in Los Angeles area?

Thank you!
Show More
Show Less
Ask Your Own Tax Question
Answered in 3 hours by:
7/10/2013
Phillip B, EA
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 704
Experience: Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
Verified
Thanks for choosing JustAnswer.com! I will do my best to provide you with a clear and concise answer to your tax question based on the information that you have provided.

1.) To start, I can tell you that a PC taxed as a regular corporation would not be an advantageous tax structure. Due to the fact that you are an orthodontist, your PC (if it is not an S-Corp) would pay 35% taxes on net taxable corporate income under Federal "personal service corporation" rules.

When you are self employed (whether that under a corporation, S-corp, partnership (LLC), or a sole proprietorship) you are required to pay in to Social Security and Medicare. For a s-corporation, this is done by taking a wage and receiving a W-2 from the S-corp. The law doesn't require all the money you receive from the S-Corp to be taken through your W-2, rather the wage must be reasonable to the wages you would receive in the open market working for someone else as a employee.

For example, lets say the average wage for a "per diem" wage is 100,000 dollars annually. You make 150,000 dollars during the year. For taxes, you would pay income and payroll taxes (social security and Medicare tax)on the 100,000 dollars that you take as a wage, and just income taxes on the remaining 50,000 dollars. This offers tax savings in that you would not be paying self-employment tax (partners in a partnership and sole proprietors pay social security tax on the first 113k and Medicare tax on all income)on all your income, only the first 100k. This is the main reason a S-corp is chosen by many businesses, SE taxes are 15% on all of your taxable business income.

The drawback to an S-corp is that you will have to unemployment taxes on 100k, and you will not be eligible to collect unemployment.

The LLC taxed as a partnership or a sole proprietorship can be advantageous in that the bookkeeping and tax work is much more simple, there are no unemployment taxes, and you can avoid some extra CA business tax that an S-Corp will pay.

Although the SE tax can be a drawback to the partnership structure through a LLC, I recommend consulting a attorney who is experienced with entity and tax structures. An experienced attorney, may also be able to structure a partnership that can save your some tax dollars as well. However, this will need a "one on one" approach between you and an attorney.

2.) This is not a question that can be answered without some significant research. If you need a solid number for average per diem wages, I recommend using Salary.com. They will already have a lot of this type of data compiled.

If there are additional questions or concerns, please reply to this answer so that I may assist your further. If this answers your question, please rate my performance between OK and Excellent so that I may receive credit for my work. Thanks for your business.
Phillip B, EA
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 704
Experience: Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.
Verified
Phillip B, EA and 87 other Tax Specialists are ready to help you
Ask your own question now
Ask Phillip B, EA Your Own Question
Phillip B, EA
Phillip B, EA
Phillip B, EA, Enrolled Agent
Category: Tax
Satisfied Customers: 704
704 Satisfied Customers
Experience: Practicing since 2004. Expert in 1040, small business, represent vs. IRS, & int'l tax mattters.

Phillip B, EA is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
This is a question on a UK resident's personal income tax on
This is a question on a UK resident's personal income tax on lump withdrawals of funds in a Canadian RRSP using an example with funds expressed in $CAN. Value of lump sum payment from the RRSP is $100… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,473 satisfied customers
Are you familiar with income tax laws on business and
Are you familiar with income tax laws on business and personal returns? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Can an independent contractor/ 1099 worker's wages be
Can an independent contractor/ 1099 worker's wages be garnished in Texas for federal student loan debt?… read more
abci168
abci168
Principal
27 satisfied customers
Business tax question. I am a sole proprietor consultant and
Business tax question. I am a sole proprietor consultant and I travel quite a bit for business. I have been increasingly using uber instead of renting cars and I assume this is a deductible expense. I… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
I had some self employment income where I was paid in
I had some self employment income where I was paid in bitcoin. I also made some bitcoin payments to a couple of businesses for what would be considered commissions. Would I report the income and expen… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
734 satisfied customers
I have a client that was a Sole Proprietor. He formed an LLC
I have a client that was a Sole Proprietor. He formed an LLC and elected to be taxed as an S-corp on 8/1/17. He purchased a $39k vehicle in his sole proprietorship in 2015 and deducted Sec 179 and A/D… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
Where can I get the Federal income tax regulation? Where can
Where can I get the Federal income tax regulation? … read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
If an owner took a draw from the business (sole proprietor
If an owner took a draw from the business (sole proprietor llc) and the business is showing a loss excluding that draw then I assume no income or self employment taxes will be paid since there is a lo… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,473 satisfied customers
Income from the leasing of cars...is it self employment
Income from the leasing of cars...is it self employment income? … read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
I am self employed sole proprietor (no employees) and I am
I am self employed sole proprietor (no employees) and I am over 50 years old. I contribute to a Roth IRA for $6500 per year. How much can I additionally contribute to a solo-401K (including employer c… read more
LEV
LEV
Retired
Bachelor's Degree
14,896 satisfied customers
As an independent contractor (1099) should I form an LLC? Do
As an independent contractor (1099) should I form an LLC? Do I need to? … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
734 satisfied customers
I am a sole proprietor and have hired a US citizen who is
https://www.google.com/search?client=safari&rls=en&q=I+am+sole+proprietor+and+paying+a+us+citizen+living+in+philippines+how+to+handle+taxes&oq=I+am+sole+proprietor+and+paying+a+us+citizen+living+in+ph… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
734 satisfied customers
If you own a trucking business as a Sole Proprietor and am
if you own a trucking business as a Sole Proprietor and am the owner that 76 years old but I have a daughter and I would like to convert over to a LLC so that if something happens to me my daughter co… read more
Richard
Richard
Tax Attorney
Doctoral Degree
4,310 satisfied customers
If I work as an independent contractor under a foreign LLC
If I work as an independent contractor under a foreign LLC partnership in California, do I need to register as a foreign LLC in CA? The gross income from CA this year would be less than 50K. CA is NOT… read more
taxmanrog
taxmanrog
Master\u0027s Degree
698 satisfied customers
FEDERAL INCOME TAX: A SINGLE WOMAN RECEIVES A 2016 FORM W-2
FEDERAL INCOME TAX: A SINGLE WOMAN RECEIVES A 2016 FORM W-2 FROM HER EMPLOYER WITH A TYPO IN THE SOCIAL SECURITY NUMBER. TO DATE THE EMPLOYER HAS NOT PROVIDED A "CORRECTED" FORM W-2. IS THERE AN IRS "… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,220 satisfied customers
What is the income tax rate if it is not withdrawn from the
Hi! What is the income tax rate if it is not withdrawn from the LLC? The owner has not withdrawn any balance from the business all the amount reinvested into the business. Thank you!… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,473 satisfied customers
I am a sole proprietor LLC, and work in the Corporate AV
quot;I am a sole proprietor LLC, and work in the Corporate AV Meeting industry , with 2 kinds of AV income. W-2 from one company part time, and 1099 from other companies. Will my employer contribution… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
My daughter-in-law receives a W-2 form from her employer,
My daughter-in-law receives a W-2 form from her employer, this is her only income. The Medicare income is $53,903 but her NJ State income is $60,053. How is that possible? No investment or interest in… read more
emc011075
emc011075
Senior Tax Specialist
Bachelor's Degree
16 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x