21 Jan Reduce Self-Employment Taxes—Increase Retirement Savings
As an independent contractor physician, the most painful consequence of failing to properly establish yourself as a corporation is the annual overpayment of income and self-employment taxes. Making the decision to incorporate not only reduces your annual tax burden but significantly increases the amount of retirement savings you can set aside each and every year.
As a physician, you have spent countless hours in the classroom and clinical training, and have finally reached the point at which you are finally reaping the financial rewards for all of your hard work, only to find out that you have to give more than half of everything you make to the government via income and self-employment taxes. Read on to learn how to reduce your tax bill, and pay yourself first.
- Physician Corporation – Make sure you Incorporate properly and file the correct forms in a timely manner. Most document filing services will file and charge you for the forms you request. What you really want is someone who will tell you the correct forms for your circumstances, assist you in completing them, and file them in a timely, cost-effective manner. This is definitely a case of getting what you pay for, but you also do not get what you do not pay for. Unfortunately, not filing a correct form in a timely manner could cost you tens of thousands of dollars annually.
- Physician Self Employment Taxes – Set up your payroll and pay business expenses on a regular schedule. By having your business expenses and monthly payroll done on a regular schedule, you will reduce the chance that something gets overlooked, which could result in late charges and unnecessary penalties. In addition, paying yourself a fixed monthly salary will put you in the habit of saving more, and make the actual running of your business more streamlined.
- Physician Retirement Accounts – Use all possible retirement plan vehicles to their maximum benefit. While the most common retirement accounts include IRA’s and Roth IRA’s, as a corporation, the options are expanded significantly, allowing you to not only save a significant amount toward your retirement, you can also shelter these funds from taxes and judgments as well.
- Physician Investment Advisor – Hire a professional to manage your assets based upon your personal goals and objectives. You are a professional, which has taken many years of education and training. Hire a professional to manage your assets, as this will decrease the likelihood of the pitfalls met by many a part-time investor, but when hiring a professional, hire someone who gets paid over time, not paid by what you invest in. Only use a Registered Investment Advisor, and never pay a sales commission.
- Physician Corporation Compliance – Keep your corporation filings current to maintain these and many other advantages that are open to you. In order to have the advantages of being a corporate entity, you must behave like a corporate entity, which includes the filing of monthly reports and holding board meetings. Failure to complete these will open you up to personal judgment and potentially hefty IRS penalties.
My Professional CFO, LLC, is a professional services firm providing the highest level of service in the areas of Corporate Compliance, Accounting and Investment Management to Independent Contractor Physicians and Physician Assistants. My Professional CFO, LLC serves as an “Outsourced CFO” to those professionals who want to focus on what they do best. Our client partners are able to draw on our decades of experience and expertise
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