1099 or W2
My wife and I are both physicians in our early 40s with W-2 jobs. Our combined annual income exceeds $900,000 ($700,000 for me and $200,000 for my wife). Aside from dividends from our brokerage accounts, our only income comes from these W-2 jobs.
I work in an outpatient private practice and am contracted to take call for the local hospital. The call pay is approximately $900 per day. These fees are paid directly to our practice, which then compensates me through W-2 wages. Of my $700,000 total earnings, about $150,000 comes from this hospital call work. I don’t need this additional income and would be comfortable using it (or redirecting equivalent funds) to maximize tax-advantaged retirement accounts, such as a cash balance plan, Solo 401(k), or SEP IRA.
I will hit the cap for SS thru my W2 employment so I assume the only additional taxes would be medicare tax for employer and employee?
I’m considering opening a sole proprietorship or S corporation to handle my hospital call income and income from online surveys. From a tax standpoint, does this make sense? My goal is to legitimately deduct business expenses related to these activities. I’d appreciate help thinking through the pros, cons, and overall strategy of if anyone has explored a similar situation.