Why Become an Independent Contractor Physician?

The 5 Mizes of Being an IC

1.) OPTIMIZE - retirement savings. As a W2 employee in 2020, the most you can typically contribute to a 401K plan is $19.5k per year if you are less than 50 years old. Through a solo 401k or a SEP IRA, you (and/or your LLC) can contribute a total of $57k pretax. Not enough? A Defined Benefit program possibly allows you to contribute $200k+/year (depending on your age) all pre-tax. Still not enough? You can add your spouse on the payroll and make contributions for him/her.

2.) MAXIMIZE - income tax deductions such as cell phone bills, health insurance, home office expenses, CME trips, certain meals/entertainment, accountant & financial planning fees, perhaps even your car, etc. It’s all about lowering your taxable income.

3.) CUSTOMIZE - your benefits including retirement and insurance plans (health, life, disability). You’re no longer subject to the limited options that your old practice provided. Or the disability insurance plan that doesn’t have a “true own occ” definition of disability.

4.) FLEXIMIZE - because you are your own boss, you have more control when it comes to making changes to your plan. You have greater flexibility and freedom from the administrators and rules of a traditional plan, allowing you to be more nimble and adjust to life as it changes.

5.) MINIMIZE - payroll taxes through an LLC (taxed as an S corporation). Most IC docs will benefit if their 1099 income is paid to their LLC and they then turn around and pay themselves a W-2 salary. For example, if you make $350k per year, that amount can go into your LLC. Then you can pay yourself a reasonable income of perhaps $175k or lower. Your payroll tax for the current tax year is now based on the $175k income rather than the entire $350k amount, potentially savings thousands of dollars in payroll taxes per year.

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