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Best route for a financial adviser to help incorporate and taxes (contractor)

Home Financial Advisors Best route for a financial adviser to help incorporate and taxes (contractor)

  • Avatar ajm184 
    Participant
    Status: Other Professional
    Posts: 542
    Joined: 07/14/2017

    I don’t believe I am communicating correctly.  What I am speaking about in my previous post is the setup of a S or C corp and calculation/payment of employee related taxes.  It is not really that difficult to calculate the taxes owed and even easier to actually pay them but you will need to do some research to determine the actual percentages.  An example below:

    Income: 10,000

    401K Pre-tax contribution: $692.31 (send eft to your 401k trustee; Vanguard, Fidelity, Schwab, whomever as long as it isn’t Edward Jones for the love of…) ($18,000/26= $692.31).

    Pre-Tax Income: $9,307.69 ($10,000 – 692.31)

    Taxes:

    Federal Income (33%, Single): $3,071.54 (you will actually make 4 payments a year in this amount times 6 or 7 depending upon the number of pay periods in a quarter)

    Federal Payroll:

    Social Security- 12.4% ($1,154.15)- Paid every time you get paid.  After $118K of earnings this tax ceases for the remainder of year.  Note, the percentage is based off paying both the employee and employer rate of 6.2%.

    Medicare- 2.9% ($269.92)- Paid every time you get paid. Note, the percentage is based off paying both the employee and employer rate of 1.45%.

    FUTA- 1.8% ($167.53) in California- Paid annually.  Calculate but pay at same time as 4th quarter estimated federal income tax by January 15th of following tax year.

    State Taxes:  There are probably more given it is California, but this was a dirty google search.

    Income Tax- 9.3% ($865.62)

    Unemployment Tax- 3.4% ($316.46)

    Employment Training Tax- .1% ($9.30), for first 7K of wages, basically pay once

    Disability Insurance- .9% ($83.77), for first $111K of wages.

    After-Tax Income: $3,369.4 Amount that goes into your bank every two weeks.  Amount will rise as you meet the income thresholds on Social Security and the other state taxes.

     

     

     

    #55330 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4260
    Joined: 05/13/2011

    Hi all, I’m going to start a 1099 contractor job position (around Los Angeles/Orange County region). I will have to preface a few things before I get into what I’m looking for.

    My plan is going to do an S-corp. I believe to do that, I would require the services of a lawyer who specializes in that. In addition to an S-corp, taxes will have to be filed differently. I am up for doing it myself, but I need to learn how and to make sure I’m doing it right. This initial learning phase is where I feel I would like to have some direct help. From what I understand, you will file quarterly and then you also have to make it look like you’re a corporation. Then there is tax optimization with an S-corp, which I think guidance from an adviser would be helpful.

    Regarding investments, I can manage that myself (allocations, etc). The intent is to set up a solo401k with either Fidelity or Vanguard. The only unknown I have is how to do the employer contribution into the 401k, given that I will be an S-corp.

    I was referred to this local group in California but they want to charge $300 a month as a retainer fee, which I feel is expensive. I saw the blog post containing the list of financial advisers. Is that something I should do, or should I look for something locally?

    Basically, I need a) help with forming S-corp, b) learn how to fill the tax forms correctly, c) learn how to fund the 401k correctly (18k employee, 35k employer). Thank you.

    Click to expand…

    These are short term needs. It doesn’t make sense to pay an ongoing fee for them. Negotiate a flat-fee just for what you need, but realize that you are not the type of client most financial advisors are looking for.

    And realize that financial advice is very expensive. If $3600 a year seems expensive to you, you’re going to need to learn to do an awful lot yourself.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #55331 Reply
    Liked by Vagabond MD
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 7315
    Joined: 01/09/2016

    I was afraid of that – you’re not the first one to have to deal with that issue. In CA, physicians cannot operate as LLCs so you’re stuck with an S-corp. An unnecessary cost, but apparently you have no choice.

    Click to expand…

    That is news to me. The CPA/financial adviser group I spoke to never mentioned that. So is your advice in the previous post still applicable – “If you need tax and business advice from a professional, you should look for a CPA. If you need financial planning and investment advice, you should look for a fee-only Certified Financial Planner, preferably one who is a member of a group that requires a minimum level of expertise and attestation to the fee-only business model in order to be admitted as a member.”?

    If I understand correctly, I could do sole proprietor, but since I have to incorporate, I have to do S-corp instead.

    So I was quoted about $300/month to do all the S-corp paperwork. Is that an appropriate price? I guess I have to actually speak with other CPA groups to find out, then.s

    Click to expand…

    Yes, my advice stands. I’m not sure what exactly you get for the $300/mo. Surely more than the s-corp paperwork! Honestly, what matters most is not what you pay but what you get for what you pay (unless, of course, the quote is ridiculous). We have been through this with other clients in CA. Will be happy to have a free initial consult with you if you have more questions (no sales tactics, you have my word).

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #55343 Reply
    Avatar xilex 
    Participant
    Status: Physician
    Posts: 33
    Joined: 07/28/2016

    I don’t believe I am communicating correctly.  What I am speaking about in my previous post is the setup of a S or C corp and calculation/payment of employee related taxes.  It is not really that difficult to calculate the taxes owed and even easier to actually pay them but you will need to do some research to determine the actual percentages.  An example below:

    Income: 10,000

    After-Tax Income: $3,369.4 Amount that goes into your bank every two weeks.  Amount will rise as you meet the income thresholds on Social Security and the other state taxes.

     

    Click to expand…

    Dang, that’s like 60% taken away by taxes 🙁

    #55345 Reply

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