Navigating Side Jobs and Taxation: Maximizing Income and Autonomy

This post originally was published on Doctor Incorporated as Side Jobs & The Benefits of Professional Micro-Corporations

It has been edited and republished here:

Side Jobs and Tax Efficiency

In the current economic landscape, the intersection of employment and side jobs presents a crucial consideration for you. One pressing inquiry that arises is how to structure side job income to optimize both financial gains and tax efficiency. This question gains even more significance against the backdrop of tax reforms targeting high-income earners.

The Biden administration's proposed tax plans, notably targeting individuals earning over $400,000 annually, have brought taxation strategies to the forefront of financial planning discussions. These proposals encompass higher taxes on income, capital gains, and estates, alongside an increase in the corporate tax rate. As you navigate these potential changes, the manner in which you receive side job income becomes pivotal.

How You Receive Your Side Income Matters

For many W-2 doctors earning above the $400,000 threshold, the options for mitigating tax burdens are limited. This limitation underscores the importance of understanding alternative structures for side job compensation. The distinction between receiving income as a W-2 employee versus a 1099 independent contractor becomes particularly relevant in this context.

Consider the scenario of an employed doctor contemplating a side job opportunity. By opting to receive additional income as a 1099 worker rather than adding it to their W-2 earnings, they seek to minimize their tax liability and retain a larger portion of their earnings. However, this decision is often subject to the policies of the hiring entity, which may unilaterally determine the classification of workers.

The significance of this classification becomes apparent in its implications for taxation. The distinction between W-2 employment and 1099 contracting can have substantial financial ramifications, affecting the amount of income you can retain. Unfortunately, individuals may find themselves at the mercy of hiring entities, with limited agency in determining their worker classification.

You Deserve to Have Agency

I am a strong believer that you should have agency in the marketplace and therefore be empowered to choose for yourself whether you want to be hired as a W-2 employee or a 1099 non-employee. You have earned this right, just like you have earned the right to consider yourself a micro-business!

Enterprises offering side job opportunities may vary in their approach to worker classification, with some preferring W-2 arrangements while others opt for 1099 contracts. Understanding the nuances of these classifications is essential for you as you seek to maximize your income and autonomy. Forming a professional micro-corporation emerges as a strategic move, offering benefits for both primary employment and side jobs. To learn more about starting your micro-corporation, I invite you to sign up for the waitlist for my upcoming course “Doctor, You Are A Business”. The first 20 to sign up up for the waitlist here will save $500.

You Are A Micro-Business

The landscape of side job opportunities has evolved significantly, facilitated by advancements in telehealth and remote work capabilities. You now have access to a broader array of opportunities, transcending geographical limitations. This expansion underscores the importance of preparedness, as you must be ready to capitalize on emerging opportunities to enhance both personal and professional growth.

Navigating side jobs within the framework of a primary employer's enterprise introduces additional complexities. While these opportunities may be interconnected with primary roles, they often entail distinct contractual arrangements and payment structures. Establishing a clear delineation between primary employment and side job engagements becomes crucial in optimizing financial outcomes.

Translation, rather than just adding in your side work such as call, medical education, governance, and medical directorships to your W-2 income, ask to receive it as 1099 income—because it will open the door for you to hold onto more of it through the tax efficiency of your micro-business.

Furthermore, you must weigh the benefits of W-2 employment against those of 1099 contracting, considering factors such as income levels and tax implications. While the decision may vary depending on individual circumstances, the $400,000 income threshold presents a clear delineation, warranting careful consideration of taxation strategies.

The concept of professional micro-corporations emerges as a compelling solution, offering greater autonomy and unique tax advantages. By establishing your own corporate entity, you can leverage deductible business expenses and retain a larger share of your income. This approach not only maximizes financial gains but also preserves professional autonomy in an evolving economic landscape.

In conclusion, the intersection of employment and side jobs presents both challenges and opportunities for you, particularly in light of taxes. Navigating these complexities requires a nuanced understanding of worker classifications and taxation strategies. By embracing innovative approaches such as professional micro-corporations, you can optimize your income and autonomy, ensuring long-term financial success.

Next Step

For those seeking guidance in navigating these complexities, platforms like SimpliMD offer invaluable resources and support. Through tailored business coaching and expert insights, you can confidently navigate the intricacies of side job engagements and taxation strategies, unlocking your full potential in the evolving landscape of modern healthcare.

Looking for some guidance on whether it would make sense for you to start a micro-corporation for your 1099 income, reach out to me for an inexpensive $99 business consultation here.

If you are a W-2 physician who is earning $400,000 per year and at least $50K in side income, I would like to connect you to CPA Alexis Galatti at Cerebral Tax Advisors here as she can help you retain more of your income. Please tell her Tod with SimpliMD sent you, as she loves working with our community. In fact she offers a guarantee that she will save you 2x your investment in the design of your tax plan, so it’s worth the free call to speak to her.