Radiologist here needing help regarding cross-state teleradiology work/taxes

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
Topic Author
chudat
Posts: 12
Joined: Tue Dec 18, 2018 11:38 am

Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by chudat » Fri May 22, 2020 7:16 pm

Dear Bogleheads,

Quick question:

I'm on the east coast (moving to Virginia in a month) and getting ready to moonlight for a teleradiology company on the west coast. For teleradiology, the radiologist is typically credentialled to work for multiple hospitals across multiple states. I will be paid as a 1099. I am married.

Q1: should I form a LLC? I'm currently a sole proprietor and tax filing has been fairly straightforward as a SP.

Q2: how does working for multiple hospitals outside of my home state work as far as taxes are concerned? Anyway/vehicles to save on taxes?

Q3: am I better off getting an accountant? I find managing my own taxes and finding different vehicles to save very interesting, but I certainly dont want to overextend myself and thinking I know more than I actually do.

Thanks all,
Chu

User avatar
FiveK
Posts: 8902
Joined: Sun Mar 16, 2014 2:43 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by FiveK » Fri May 22, 2020 7:50 pm

Q2: If you had no physical presence for employment in another state, you won't owe tax to that state even if the 1099-NEC (used to be 1099-MISC) has another state's address for the employer. Of course, if the teleradiology company withholds another state's tax you'll need to file to get it back, so it would be best if they don't do that.

IANAL and couldn't find specific US Code guidance to support the above, but believe it is correct. 1099-misc from out of state and If You Work Remotely Where Do You Pay Taxes? support that, but they aren't definitive.

Q1&3: Don't know enough to comment.

bayview
Posts: 2163
Joined: Thu Aug 02, 2012 7:05 pm
Location: WNC

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by bayview » Fri May 22, 2020 8:48 pm

You might want to post on this forum as well: https://www.whitecoatinvestor.com/
The continuous execution of a sound strategy gives you the benefit of the strategy. That's what it's all about. --Rick Ferri

spammagnet
Posts: 1101
Joined: Wed Apr 27, 2016 9:42 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by spammagnet » Fri May 22, 2020 10:36 pm

As an LLC filing taxes as a corporation and paying yourself a salary as an employee, a significant portion of your salary can be tax-deferred, as long as your taxable salary is reasonable. (I.e., don't evade taxes.) There are some additional expenses and bureaucratic hassles but it may be worthwhile.

jacoavlu
Posts: 943
Joined: Sun Jan 06, 2013 12:06 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by jacoavlu » Fri May 22, 2020 11:11 pm

spammagnet wrote:
Fri May 22, 2020 10:36 pm
As an LLC filing taxes as a corporation and paying yourself a salary as an employee, a significant portion of your salary can be tax-deferred, as long as your taxable salary is reasonable. (I.e., don't evade taxes.) There are some additional expenses and bureaucratic hassles but it may be worthwhile.
This is not correct. The only taxes you save as an S Corp is FICA tax on distributions.

And when reasonable salary exceeds the social security wage base, which it will for a full time radiologist, the only portion of FICA you save on distributions is 2.9% Medicare tax

And S Corp taxes are more complicated. And more expensive. Payroll costs. 1120S preparation. Possible state level entity taxes. More complex solo 401k administration. And you may shoot yourself in the foot via a lower QBI deduction.

by the way I’m a radiologist.

Do you know what state your 1099 will be coming from? Will it be California? That may complicate things.

jacoavlu
Posts: 943
Joined: Sun Jan 06, 2013 12:06 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by jacoavlu » Fri May 22, 2020 11:15 pm

OP. You should get an accountant. But find a highly competent one. If their knee jerk reaction is to form an S Corp, ask them to present both scenarios - sole prop and S Corp - and be sure they include solo 401k employee and employer contributions and also QBI deduction. And accounting and payroll costs, taxes, fees.

An S Corp probably doesn’t make sense until you’re above $350k or even $400k income.

over on whitecoatinvestor you can find some vetted tax advisors

spammagnet
Posts: 1101
Joined: Wed Apr 27, 2016 9:42 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by spammagnet » Sat May 23, 2020 12:15 am

jacoavlu wrote:
Fri May 22, 2020 11:11 pm
spammagnet wrote:
Fri May 22, 2020 10:36 pm
As an LLC filing taxes as a corporation and paying yourself a salary as an employee, a significant portion of your salary can be tax-deferred, as long as your taxable salary is reasonable. (I.e., don't evade taxes.) There are some additional expenses and bureaucratic hassles but it may be worthwhile.
This is not correct. The only taxes you save as an S Corp is FICA tax on distributions. ...
Can you, as employer, not contribute a significantly higher amount as tax deferred contributions to a 401k, than you can defer as a sole proprietor?

jacoavlu
Posts: 943
Joined: Sun Jan 06, 2013 12:06 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by jacoavlu » Sat May 23, 2020 1:07 am

spammagnet wrote:
Sat May 23, 2020 12:15 am
jacoavlu wrote:
Fri May 22, 2020 11:11 pm
spammagnet wrote:
Fri May 22, 2020 10:36 pm
As an LLC filing taxes as a corporation and paying yourself a salary as an employee, a significant portion of your salary can be tax-deferred, as long as your taxable salary is reasonable. (I.e., don't evade taxes.) There are some additional expenses and bureaucratic hassles but it may be worthwhile.
This is not correct. The only taxes you save as an S Corp is FICA tax on distributions. ...
Can you, as employer, not contribute a significantly higher amount as tax deferred contributions to a 401k, than you can defer as a sole proprietor?
No. As a matter of fact often lower. S Corp distributions do not count as employee Comp. Only W2 compensation counts.

As a sole prop, compensation is higher. So is QBI.

A sole prop can make employee and employer contributions, if you didn’t know.

spammagnet
Posts: 1101
Joined: Wed Apr 27, 2016 9:42 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by spammagnet » Sat May 23, 2020 3:12 am

jacoavlu wrote:
Sat May 23, 2020 1:07 am
No. As a matter of fact often lower. S Corp distributions do not count as employee Comp. Only W2 compensation counts.
An LLC electing to be taxed as an S corp may choose to pay its member(s) as a W2 employee(s).

https://www.nolo.com/legal-encyclopedia ... 29025.html

The OP should consult with a CPA to determine the benefits, if any, of doing so.

Topic Author
chudat
Posts: 12
Joined: Tue Dec 18, 2018 11:38 am

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by chudat » Sat May 23, 2020 7:57 am

jacoavlu wrote:
Fri May 22, 2020 11:11 pm
spammagnet wrote:
Fri May 22, 2020 10:36 pm
As an LLC filing taxes as a corporation and paying yourself a salary as an employee, a significant portion of your salary can be tax-deferred, as long as your taxable salary is reasonable. (I.e., don't evade taxes.) There are some additional expenses and bureaucratic hassles but it may be worthwhile.
This is not correct. The only taxes you save as an S Corp is FICA tax on distributions.

And when reasonable salary exceeds the social security wage base, which it will for a full time radiologist, the only portion of FICA you save on distributions is 2.9% Medicare tax

And S Corp taxes are more complicated. And more expensive. Payroll costs. 1120S preparation. Possible state level entity taxes. More complex solo 401k administration. And you may shoot yourself in the foot via a lower QBI deduction.

by the way I’m a radiologist.

Do you know what state your 1099 will be coming from? Will it be California? That may complicate things.
One of the states will be California.

From what I understand, forming a S-corp proly doesn't make too much sense if I only expect 100-120k from my teleradiology moonlighting? I have been operating as a sole prop....thinking of forming LLC to protect against personal liabilities?

What's the typical fee that a competent accountant would charge for something like this?

jacoavlu
Posts: 943
Joined: Sun Jan 06, 2013 12:06 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by jacoavlu » Sat May 23, 2020 10:13 am

spammagnet wrote:
Sat May 23, 2020 3:12 am
jacoavlu wrote:
Sat May 23, 2020 1:07 am
No. As a matter of fact often lower. S Corp distributions do not count as employee Comp. Only W2 compensation counts.
An LLC electing to be taxed as an S corp may choose to pay its member(s) as a W2 employee(s).

https://www.nolo.com/legal-encyclopedia ... 29025.html

The OP should consult with a CPA to determine the benefits, if any, of doing so.
I didn’t explain my point clearly enough

Employer retirement contributions are based on employee Compensation which has a specific definition.

As a sole prop, all of the income is Compensation for retirement plan purposes

As an S Corp, only W2 wages count. Distributions (which save FICA tax) can not be included in the calculation for determining employer retirement contributions.

So, as an S Corp, Compensation as it is defined by the retirement plan, will be less than it will be as an S Corp.

So no, forming an S Corp does not increase the allowed retirement contributions.

jacoavlu
Posts: 943
Joined: Sun Jan 06, 2013 12:06 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by jacoavlu » Sat May 23, 2020 10:19 am

chudat wrote:
Sat May 23, 2020 7:57 am
jacoavlu wrote:
Fri May 22, 2020 11:11 pm
spammagnet wrote:
Fri May 22, 2020 10:36 pm
As an LLC filing taxes as a corporation and paying yourself a salary as an employee, a significant portion of your salary can be tax-deferred, as long as your taxable salary is reasonable. (I.e., don't evade taxes.) There are some additional expenses and bureaucratic hassles but it may be worthwhile.
This is not correct. The only taxes you save as an S Corp is FICA tax on distributions.

And when reasonable salary exceeds the social security wage base, which it will for a full time radiologist, the only portion of FICA you save on distributions is 2.9% Medicare tax

And S Corp taxes are more complicated. And more expensive. Payroll costs. 1120S preparation. Possible state level entity taxes. More complex solo 401k administration. And you may shoot yourself in the foot via a lower QBI deduction.

by the way I’m a radiologist.

Do you know what state your 1099 will be coming from? Will it be California? That may complicate things.
One of the states will be California.

From what I understand, forming a S-corp proly doesn't make too much sense if I only expect 100-120k from my teleradiology moonlighting? I have been operating as a sole prop....thinking of forming LLC to protect against personal liabilities?

What's the typical fee that a competent accountant would charge for something like this?
The S Corp question needs to take into account all of your income. Not just the moonlighting.

Is your other work 1099 / sole prop also? If so what do you expect for Gross income 2020?

If you have a paycheck and 1099 coming from California, you will need to do some research. California is notorious for wanting its taxes. Will you need to file a CA return and pay CA state taxes? I’m not sure but I believe Yes

https://www.ftb.ca.gov/file/personal/re ... ident.html

muddgirl
Posts: 112
Joined: Wed Aug 17, 2016 1:33 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by muddgirl » Sat May 23, 2020 10:35 am

A teleworker would not even qualify as a nonresident taxpayer in California, unless they have some temporary physical presence in California. The FTB may be aggressive in trying to collect but that doesn't mean they'd actually owe.

jacoavlu
Posts: 943
Joined: Sun Jan 06, 2013 12:06 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by jacoavlu » Sat May 23, 2020 10:46 am

muddgirl wrote:
Sat May 23, 2020 10:35 am
A teleworker would not even qualify as a nonresident taxpayer in California, unless they have some temporary physical presence in California. The FTB may be aggressive in trying to collect but that doesn't mean they'd actually owe.
it’s a unique situation as a radiologist. The patient is in a CA medical facility. The physician is in another state but must be licensed by CA and have privileges at the CA facility. The paycheck and 1099 will come from a CA employer.

marielake
Posts: 121
Joined: Fri Mar 14, 2014 5:39 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by marielake » Sat May 23, 2020 11:03 am

FiveK wrote:
Fri May 22, 2020 7:50 pm
Q2: If you had no physical presence for employment in another state, you won't owe tax to that state even if the 1099-NEC (used to be 1099-MISC) has another state's address for the employer. Of course, if the teleradiology company withholds another state's tax you'll need to file to get it back, so it would be best if they don't do that.

IANAL and couldn't find specific US Code guidance to support the above, but believe it is correct. 1099-misc from out of state and If You Work Remotely Where Do You Pay Taxes? support that, but they aren't definitive.

Q1&3: Don't know enough to comment.
Maybe every state is different, but I worked remotely for a service in another state (Mass) and was subject to taxes even though I never stepped foot there. Turbotax showed I owed Mass $0; I didn't trust that result. I called Mass DOR and they told me I was subject even though I had no physical presence.

BogleTaxPro
Posts: 11
Joined: Sat Apr 04, 2020 6:08 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by BogleTaxPro » Sat May 23, 2020 11:08 am

Sorry for the bad news, but California makes it very clear:
https://www.ftb.ca.gov/file/personal/re ... ident.html

As a nonresident, you pay tax on your taxable income from California sources.

Sourced income includes, but is not limited to:

Services performed in California
Rent from real property located in California
The sale or transfer of real California property
Income from a California business, trade or profession

jacoavlu
Posts: 943
Joined: Sun Jan 06, 2013 12:06 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by jacoavlu » Sat May 23, 2020 11:18 am

this raises an interesting question

does OP save state taxes forming an S Corp?

hypothetically if resident state had zero tax and CA has 10% tax

S Corp domiciled in home state

OP is employee-shareholder of S Corp

S Corp is paid by CA Corp and receives 1099

S Corp pays OP wages in home state

Clearly if S Corp had an employee emptying the trash bins that employee doesn’t pay CA state tax

So what about the OP w S Corp? CA tax on wages and K-1 income both?

(Just an interesting question. S Corp still probably doesn’t make sense and home state isn’t zero tax)

MarkNYC
Posts: 1729
Joined: Mon May 05, 2008 7:58 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by MarkNYC » Sat May 23, 2020 12:08 pm

jacoavlu wrote:
Sat May 23, 2020 10:46 am
muddgirl wrote:
Sat May 23, 2020 10:35 am
A teleworker would not even qualify as a nonresident taxpayer in California, unless they have some temporary physical presence in California. The FTB may be aggressive in trying to collect but that doesn't mean they'd actually owe.
it’s a unique situation as a radiologist. The patient is in a CA medical facility. The physician is in another state but must be licensed by CA and have privileges at the CA facility. The paycheck and 1099 will come from a CA employer.
I don't think the CA license is relevant, and I disagree with those who claim CA tax should be owed. CA will tax a CA nonresident for any "CA source income" received. For a self-employed CA nonresident who provides services, the "source" of the services is the location where the work is actually performed, not the location of the customer or the client. I'm not aware of any state where this source rule is different for services performed by a nonresident non-employee.

As a practical matter, the OP will receive one or more forms 1099-NEC for the services provided. What's relevant is not the address of the payer listed on the 1099 but the state, if any, listed in Box 6. If CA is listed in this box, the OP will either need to get the 1099 corrected or else CA will expect (incorrectly in my view) a CA tax return filed and CA tax paid.

MarkNYC
Posts: 1729
Joined: Mon May 05, 2008 7:58 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by MarkNYC » Sat May 23, 2020 1:18 pm

marielake wrote:
Sat May 23, 2020 11:03 am
Maybe every state is different, but I worked remotely for a service in another state (Mass) and was subject to taxes even though I never stepped foot there. Turbotax showed I owed Mass $0; I didn't trust that result. I called Mass DOR and they told me I was subject even though I had no physical presence.
Tax advice given by an MA DOR phone representative is not authoritative, and might be biased in favor of his/her employer. Given the information you've provided, you may have received incorrect filing instructions. For a definition of MA source income for a nonresident, see: 830 CMR 62.5A.1 Nonresident Income Tax.

Spirit Rider
Posts: 12914
Joined: Fri Mar 02, 2007 2:39 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by Spirit Rider » Sat May 23, 2020 6:00 pm

MarkNYC wrote:
Sat May 23, 2020 1:18 pm
marielake wrote:
Sat May 23, 2020 11:03 am
Maybe every state is different, but I worked remotely for a service in another state (Mass) and was subject to taxes even though I never stepped foot there. Turbotax showed I owed Mass $0; I didn't trust that result. I called Mass DOR and they told me I was subject even though I had no physical presence.
Tax advice given by an MA DOR phone representative is not authoritative, and might be biased in favor of his/her employer. Given the information you've provided, you may have received incorrect filing instructions. For a definition of MA source income for a nonresident, see: 830 CMR 62.5A.1 Nonresident Income Tax.
Last I knew, only if an employer is located in Connecticut, New York, Delaware, New Jersey, Nebraska, or Pennsylvania. Does the misnomer (convenience of the employer rule) apply when those states determine if they will tax the wages of a non-resident telecommuter.

User avatar
btq96r
Posts: 122
Joined: Thu Dec 26, 2019 3:46 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by btq96r » Sat May 23, 2020 6:12 pm

I help administrate a rad group, and we have more a few radiologists working telerad evening shifts from out of state; but they're employees, not 1099s. I think we have the tax withholding set to the state they're in rather than where our offices are.

You'll probably have a bunch more state license and Medicare apps to fill out and keep current, as well as however many hospital privilege forms you need to have a full work list. But the taxes should be straight forward for you if you aren't billing and collecting for yourself.
Moderation is for Canadians.

kidshrink
Posts: 57
Joined: Mon Mar 25, 2013 2:33 pm

Re: Radiologist here needing help regarding cross-state teleradiology work/taxes

Post by kidshrink » Sat May 23, 2020 6:51 pm

MarkNYC wrote:
Sat May 23, 2020 12:08 pm
jacoavlu wrote:
Sat May 23, 2020 10:46 am
muddgirl wrote:
Sat May 23, 2020 10:35 am
A teleworker would not even qualify as a nonresident taxpayer in California, unless they have some temporary physical presence in California. The FTB may be aggressive in trying to collect but that doesn't mean they'd actually owe.
it’s a unique situation as a radiologist. The patient is in a CA medical facility. The physician is in another state but must be licensed by CA and have privileges at the CA facility. The paycheck and 1099 will come from a CA employer.
I don't think the CA license is relevant, and I disagree with those who claim CA tax should be owed. CA will tax a CA nonresident for any "CA source income" received. For a self-employed CA nonresident who provides services, the "source" of the services is the location where the work is actually performed, not the location of the customer or the client. I'm not aware of any state where this source rule is different for services performed by a nonresident non-employee.

As a practical matter, the OP will receive one or more forms 1099-NEC for the services provided. What's relevant is not the address of the payer listed on the 1099 but the state, if any, listed in Box 6. If CA is listed in this box, the OP will either need to get the 1099 corrected or else CA will expect (incorrectly in my view) a CA tax return filed and CA tax paid.
This is how I’ve operated for the past 6 years on advisement of a CPA practicing in California. I practice in my office outside of CA. Hence, non-CA sourced income.

Separately, CA licensure for seeing CA patients is a requirement of the Medical Board of CA, which is a different entity than the FTB.

Edit: everything I’ve read has pointed away from an LLC as protective of personal assets for a sole proprietorship and possibly S Corp. C Corps may be different. I have always read to increase your malpractice coverage, practice good medicine and be likable to your patients (if applicable) as the best defenses to malpractice suits.

Post Reply