Contact UsWe are a married couple and we both have W2 jobs from stable large corporations. Wife also has 1099 income (physician practice + moonlighting). How should we organize her business so that we can maximize tax avoidance while taking our combined situation into account? These numbers are for 2018.
Income From W2/Employer
His Income: $340,000
Her Income: $210,000
Income - 1099 (Her is Physician)
Her Private Practice: $100,000 (expected to be $187,200 in 2019)
Her Moonlighting: $100,000 (expected to be $145,000 in 2019)
Income: Employer Match 401k
His: $18,900
Her: $21,000
Self Tax Deferrals:
His 401k contribution from W2 income: $18,500
His NQDC from W2 income: $120,000
Her 401k contribution from W2 income: $18,500
Her 457b from W2 income: $18,500
Tax State: New York City
How should we construct an organization for her 1099 income of around 200,000? Do we do sole proprietorship, S Corp, LLC or C Corp. Our goal is to maximize deferral of taxes from the 1099 income i.e. in addition to 20% towards a SEP IRA, what are the ways we can defer receipt of this income (and potentially invest the deferred compensation).
(a): One idea was to have a sole proprietorship and contribute 20% of $200,000 to SEP IRA, leaving roughly $160,000 of income from 1099. Since she would have already paid maximum FICA from W2, she would only pay 2.9% self employment tax on $160,000 and not the 15.3%. Ofcourse $160k gets added to our Gross income!
(b): Another idea we are discussing/thinking if making a 1 person C-corp. She gets a salary of $165k from C-corp. C-Corp makes 20% contribution as profit to her sep ira of $33k. $2k is the profit of C-corp. Also C-corp offers her a NQDC and entire $165k gets deferred. Will this work? Would the C-corp still need to pay payroll taxes on $165k?
In short, for the $200k (expected to $332k in 2019) 1099 incomn, what is the way you suggest to maximize tax avoidance?
His Income: $340,000
Her Income: $210,000
Income - 1099 (Her is Physician)
Her Private Practice: $100,000 (expected to be $187,200 in 2019)
Her Moonlighting: $100,000 (expected to be $145,000 in 2019)
Income: Employer Match 401k
His: $18,900
Her: $21,000
Self Tax Deferrals:
His 401k contribution from W2 income: $18,500
His NQDC from W2 income: $120,000
Her 401k contribution from W2 income: $18,500
Her 457b from W2 income: $18,500
Tax State: New York City
How should we construct an organization for her 1099 income of around 200,000? Do we do sole proprietorship, S Corp, LLC or C Corp. Our goal is to maximize deferral of taxes from the 1099 income i.e. in addition to 20% towards a SEP IRA, what are the ways we can defer receipt of this income (and potentially invest the deferred compensation).
(a): One idea was to have a sole proprietorship and contribute 20% of $200,000 to SEP IRA, leaving roughly $160,000 of income from 1099. Since she would have already paid maximum FICA from W2, she would only pay 2.9% self employment tax on $160,000 and not the 15.3%. Ofcourse $160k gets added to our Gross income!
(b): Another idea we are discussing/thinking if making a 1 person C-corp. She gets a salary of $165k from C-corp. C-Corp makes 20% contribution as profit to her sep ira of $33k. $2k is the profit of C-corp. Also C-corp offers her a NQDC and entire $165k gets deferred. Will this work? Would the C-corp still need to pay payroll taxes on $165k?
In short, for the $200k (expected to $332k in 2019) 1099 incomn, what is the way you suggest to maximize tax avoidance?
