Personal advice

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Fire wicket
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Personal advice

Post by Fire wicket » Mon Oct 09, 2017 6:55 pm

I am a long time lurker and seeking some advice.

I am a medical trainee who will have a job next year paying much more than anticipated. I’m seeking any tax reduction advice. I also have a somewhat unique marriage situation.

-I am married with 1 child
-my income will be 1 million dollars
-my wife’s income for a company she owns is 300-400k per year
-I will max out 401k contributions from employer and employee (50k).
-I will complete Roth conversions (5500 per year)
-I will contribute to a 529 yearly (13k)
-I will invest all excess money in a taxable account low cost index fund account 90/10 stock/bond mix
-I will take all deductions possible and bussiness write offs.
-if probably won’t taxloss harvest because that will not affect my AGI
-my family can comfortably live of 70-100k per year.

I will be a business owner filing 1099s and have full control over the pension/retirement plan. I know one can decrease FICA payments by having quarterly distributions which I also plan on doing (paying myself a “salary” of 500k while the rest will be corporate distributions.)

Several questions:
1) How can I tax shelter more money? (Is about ~80k the most you can shelter?) and is there anything I can do with the bussiness to shelter more money?
2) should I file jointly with my wife? (It seems like no high income earner should do this given marginal tax brackets...am I missing something here?)

onthecusp
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Re: Personal advice

Post by onthecusp » Mon Oct 09, 2017 8:11 pm

Most of your questions are beyond my experience. But after a question I have some advice anyway. :D

How can you max out a 401k when you are paid on a 1099? I didn't think companies could offer such to "contract" employees.

You have enough income to hire a good CPA who should be able to answer your questions with much more accuracy.

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Tyler Aspect
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Re: Personal advice

Post by Tyler Aspect » Tue Oct 10, 2017 12:41 am

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Last edited by Tyler Aspect on Wed Oct 11, 2017 8:09 pm, edited 1 time in total.
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David Scubadiver
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Re: Personal advice

Post by David Scubadiver » Tue Oct 10, 2017 12:50 am

Generally, I would not suggest referring to salary by using quotes like that.

Second, are you sure you want such a high salary versus distributions given the plan to tax pass through entities more lightly?

Your Tax Loss harverst statement confused me. Why would you not benefit from deducting $3,000 in losses against your taxable income/taxable gains?

Finally, people generally can’t move from salaried medical technician to millionaire business owner without a substantial degree of risk. Caution advised.
Last edited by David Scubadiver on Tue Oct 10, 2017 8:05 am, edited 1 time in total.

The Wizard
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Re: Personal advice

Post by The Wizard » Tue Oct 10, 2017 5:37 am

I would definitely work with a CPA to structure your business income arrangement along with your tax sheltered retirement plan.

And I'm curious what the nature of this business is.
I'm assuming the OP is an MD completing specialty training.
So are you simply opening a sole practitioner business in ophthalmology or whatever?
If so, how can you presume to have a full patient load starting on day one?
Attempted new signature...

Grt2bOutdoors
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Re: Personal advice

Post by Grt2bOutdoors » Tue Oct 10, 2017 6:13 am

Seek professional guidance but be wary of tax shelter gimmicks - old saying: "either you pay now or you pay later", there is no escaping the tax man.
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Fire wicket
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Re: Personal advice

Post by Fire wicket » Tue Oct 10, 2017 6:52 am

Yes, I will be consulting a CPA. Any advice on how to choose an appropriate/reputable CPA? I am a medical resident physician who will be graduating residency and taking over a single person practice that is contracted with a hospital system for the professional component (thus it is technically contract work). The doctor there now is retiring and selling the practice. There is a longstanding consistent patient volume already in place with low risk of reduction.

In terms of the tax loss harvesting, if I am investing for the long term and will not bump my marginal tax rate down by harvesting I just don't see the point.

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dwickenh
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Re: Personal advice

Post by dwickenh » Tue Oct 10, 2017 7:24 am

Fire wicket wrote:
Tue Oct 10, 2017 6:52 am
Yes, I will be consulting a CPA. Any advice on how to choose an appropriate/reputable CPA? I am a medical resident physician who will be graduating residency and taking over a single person practice that is contracted with a hospital system for the professional component (thus it is technically contract work). The doctor there now is retiring and selling the practice. There is a longstanding consistent patient volume already in place with low risk of reduction.

In terms of the tax loss harvesting, if I am investing for the long term and will not bump my marginal tax rate down by harvesting I just don't see the point.
It is kind of like lighting a match to 1200-1500 dollars a year(40-50% of 3000 AGI reduction) that you could delay the tax cost to a time when your tax rates are lower.

I am sure livesoft will be more harsh than I was :D

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

David Scubadiver
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Re: Personal advice

Post by David Scubadiver » Tue Oct 10, 2017 8:07 am

dwickenh wrote:
Tue Oct 10, 2017 7:24 am
Fire wicket wrote:
Tue Oct 10, 2017 6:52 am
Yes, I will be consulting a CPA. Any advice on how to choose an appropriate/reputable CPA? I am a medical resident physician who will be graduating residency and taking over a single person practice that is contracted with a hospital system for the professional component (thus it is technically contract work). The doctor there now is retiring and selling the practice. There is a longstanding consistent patient volume already in place with low risk of reduction.

In terms of the tax loss harvesting, if I am investing for the long term and will not bump my marginal tax rate down by harvesting I just don't see the point.
It is kind of like lighting a match to 1200-1500 dollars a year(40-50% of 3000 AGI reduction) that you could delay the tax cost to a time when your tax rates are lower.

I am sure livesoft will be more harsh than I was :D

Dan
Fortunately, you don't have to see the point to be guided by this advice. Were I in your shoes and just starting out, I would open an account at Wisebanyan. You don't have time to monitor your investments. Let the robot do it for you. And it will harvest your losses for you (if you wish), even though you don't see the point.

veindoc
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Re: Personal advice

Post by veindoc » Tue Oct 10, 2017 8:08 am

Just a few thoughts.

Does this practice have a business manager? In addition to clinical responsibilities you will also be doing payroll and other admin jobs? Make sure you are prepared knowledge wise to handle all that. In addition to practicing medicine it sounds like you will be running a business. Get some input from your wife. I hope you are not biting off more than you can chew. Having said that congrats on the opportunity.

How old is the child? I would consider superfunding the 529. You can certainly afford it. Between the two of you, you can fund it with 5 years of gift contributions each, for a total of 140,000. Bam!

By Roth conversions I am assuming you mean a backdoor ROTH. I would look into mega backdoor ROTHS. Check out the wiki.

JBTX
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Re: Personal advice

Post by JBTX » Tue Oct 10, 2017 8:28 am

You need to get a good CPA. Apparently there are situations where you can have multiple retirement plans. Looks like you can have solo 401k and defined benefits plan. This is an area where it would behoove you to pay a little money to help save a lot of money.

https://www.google.com/amp/s/www.forbes ... vings/amp/

https://www.google.com/amp/s/www.fool.c ... -empl.aspx

2pedals
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Re: Personal advice

Post by 2pedals » Tue Oct 10, 2017 8:45 am

The concept of moving from medical trainee to a million dollar income seams a bit much like a pipe dream to me. I think you need a realistically reassess your future business income and expenses.

PublicAccountant
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Re: Personal advice

Post by PublicAccountant » Thu Oct 12, 2017 8:57 pm

I am a long time lurker as well, but I thought I would offer my thoughts here. First, let me say that I agree with the above posters who said that you need to consult with a CPA, at a minimum. At your stage of the game, you need someone you can trust without a doubt to provide solid tax planning advice so that you can focus on your business. You have questions that will require more information in order for anyone to properly plan out the best solutions. If you really expect your income to be $1 million, then I hope I am not the first person to tell you that it will take a lot of work just to ensure that it stays that way.

If you are serious about wanting to tax shelter more money per year than what is typically allowed, then I would recommend that you also find & hire a benefits consulting firm to create a tailored retirement investment plan, which would likely be comprised of a combined 401(k) plan and defined benefit retirement plan. This would enable participating high-income earners to increase tax deductible contributions, minimize risk and greatly optimize retirement benefits.

Many private equity, venture capital, investment banking, hedge fund, accounting and law firms, doctors’ groups and other successful businesses use these benefits consulting services. I have seen plans that allow participants to set aside up to an additional $300,000 of tax deductible contributions on top of traditional 401k and profit sharing plans, increasing contributions to a far greater amount than those of typical profit sharing and 401(k) plans.

A good benefits consulting firm will do a couple of things. They will create a plan in which the assets have the ability to grow not only tax deferred, but also safe from creditors. In addition, they will design the plan such that their clients have maximum flexibility in terms of investment options. Further, and perhaps most importantly, they will submit the plan design to the IRS for a Determination Letter, making certain that the plan is IRS approved.

An important thing to note is that in most of these plans, depending on the design - once you start to make contributions, you must make contributions every year. Thus, these types of plans will work best for companies that have at least two owners/shareholders/partners/senior management members that gross over $400k per year who have the ability to consistently sock away several hundreds of thousands of dollars into the plan.

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LadyGeek
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Re: Personal advice

Post by LadyGeek » Thu Oct 12, 2017 9:26 pm

This thread is now in the Personal Finance (Not Investing) forum (tax strategy).

Fire wicket and PublicAccountant, Welcome!
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