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Tax Deductions For A Physical Therapist Doing 1099 Work

Corporate Law Discussions

Tax Deductions For A Physical Therapist Doing 1099 Work

Postby Baldwyn » Sat Dec 03, 2016 8:28 pm

s About Taxes)/Tax Deductions for a Physical Therapist doing 1099 work Advertisement Expert: John Stancil, CPA - 12/21/2009 Hi, I'm a physical therapist in new york city with a full time employment where I get a W2 for $75,000 annual. I also do independent contracting on the side where I earn around $40,000 a year under 1099. As an independent contractor, I do home visits on patients. Based on those situations, here are my questions:

#1. I'd like to know the best possible way for me to lessen taxation on my 1099 earnings. Would you advice sole proprietorship, incorporating or forming a PLLC?

#2. Since I visit patient's homes regularly, do you think I could get a car lease and write it off 100% as a tax deductible including the gas and maintenance/repairs?

#3. I also do notes and documentations at home as well as keep records and also use a PC and internet to email the documentations to the home care agencies. Based on this, will I be able to write off a portion of my home rent? If so, how will I know how many percent is deductible?

Thank you so much for all your help.

ANSWER: Mary,

Thanks for your question.

1. Forming an LLC or S corporation will have no tax effect, as you pay tax on the earnings rather than the amounts withdrawn.  Forming a C corporation probably would result in higher or negligible tax savings as you would have to pay yourself a salary and the corporation would pay SS and Medicare taxes in addition to withhold them from you.  Any earnings that were not salary that you withdrew from the corporation would be taxed at the corporate level and again to you as dividends.  

A sole proprietorship is not legally a separate entity, but simply an extension of you.

Bottom line, there is not much in tax savings to be realized.  I would recommend an LLC or corporation for the liability protection, however.

2. You could deduct 100% of the lease payments if the car was used 100% for your business.  Driving to your W-2 job would be considered commuting and therefore personal use.

3. You can take a deduction for a home office if you meet two criteria.  You must have an area in your home that is used 1) exclusively and 2) regularly for business purposes.  This does not include any use that related to you W-2 employment.  Also, if you incorporate, you could not take a home office deduction unless the corporation rented the office from you.  Then you have rental income.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

Hi John, Just a follow up on the first question. I am not very knowledgeable on the different corporations and how it affects taxes so could you just elaborate on why an LLC or S corp will have no tax effect?

I was doing some research earlier and from the books I've read, the LLC or S corp will allow for more tax deductions as opposed to not incorporating at all. Which, I assume, in the end I would have less taxes to pay for the 1099 income I have. I apologize but I'm just confused about the whole process regarding taxation for 1099 and the best pay to pay the least amount in taxes. This is becoming more pressing because I intend to double my 1099 work in 2010 and I want to know if the best step to undertake is get a separate business entity.  

Also, I plan to lease a car for exclusive use during my home care visits to patients. That's why I want to know if it can be 100% tax deductible. That will be my deciding factor. Again, thanks for the expert advice and for the prompt reply.  
Baldwyn
 
Posts: 42
Joined: Sun Mar 02, 2014 12:58 am

Tax Deductions For A Physical Therapist Doing 1099 Work

Postby Adalson » Mon Dec 05, 2016 8:11 am

s About Taxes)/Tax Deductions for a Physical Therapist doing 1099 work Advertisement Expert: John Stancil, CPA - 12/21/2009 Hi, I'm a physical therapist in new york city with a full time employment where I get a W2 for $75,000 annual. I also do independent contracting on the side where I earn around $40,000 a year under 1099. As an independent contractor, I do home visits on patients. Based on those situations, here are my questions:

#1. I'd like to know the best possible way for me to lessen taxation on my 1099 earnings. Would you advice sole proprietorship, incorporating or forming a PLLC?

#2. Since I visit patient's homes regularly, do you think I could get a car lease and write it off 100% as a tax deductible including the gas and maintenance/repairs?

#3. I also do notes and documentations at home as well as keep records and also use a PC and internet to email the documentations to the home care agencies. Based on this, will I be able to write off a portion of my home rent? If so, how will I know how many percent is deductible?

Thank you so much for all your help.

ANSWER: Mary,

Thanks for your question.

1. Forming an LLC or S corporation will have no tax effect, as you pay tax on the earnings rather than the amounts withdrawn.  Forming a C corporation probably would result in higher or negligible tax savings as you would have to pay yourself a salary and the corporation would pay SS and Medicare taxes in addition to withhold them from you.  Any earnings that were not salary that you withdrew from the corporation would be taxed at the corporate level and again to you as dividends.  

A sole proprietorship is not legally a separate entity, but simply an extension of you.

Bottom line, there is not much in tax savings to be realized.  I would recommend an LLC or corporation for the liability protection, however.

2. You could deduct 100% of the lease payments if the car was used 100% for your business.  Driving to your W-2 job would be considered commuting and therefore personal use.

3. You can take a deduction for a home office if you meet two criteria.  You must have an area in your home that is used 1) exclusively and 2) regularly for business purposes.  This does not include any use that related to you W-2 employment.  Also, if you incorporate, you could not take a home office deduction unless the corporation rented the office from you.  Then you have rental income.

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

Hi John, Just a follow up on the first question. I am not very knowledgeable on the different corporations and how it affects taxes so could you just elaborate on why an LLC or S corp will have no tax effect?

I was doing some research earlier and from the books I've read, the LLC or S corp will allow for more tax deductions as opposed to not incorporating at all. Which, I assume, in the end I would have less taxes to pay for the 1099 income I have. I apologize but I'm just confused about the whole process regarding taxation for 1099 and the best pay to pay the least amount in taxes. This is becoming more pressing because I intend to double my 1099 work in 2010 and I want to know if the best step to undertake is get a separate business entity.  

Also, I plan to lease a car for exclusive use during my home care visits to patients. That's why I want to know if it can be 100% tax deductible. That will be my deciding factor. Again, thanks for the expert advice and for the prompt reply.  
Adalson
 
Posts: 37
Joined: Sat Mar 15, 2014 9:02 pm

Tax Deductions For A Physical Therapist Doing 1099 Work

Postby Stafford » Mon Dec 05, 2016 8:28 am

LLC's and S Corps are what are know as "pass through entities," meaning they don't pay tax, but the earnings are passed through to the owners with the tax to be paid on their 1040's.

The amount of deductions you may take does not depend on the form of organization - you can deduct any reasonable and necessary business expense, regardless of the form of organization.  Granted, you may have more expenses with an LLC or S corp, as there are costs involved in maintaining these forms of organization.  So you have more deductions because you spend more.

Again, if the car is used 100% for business purposes, it is 100% deductible - regardless of your form of organization.

I would recommend an LLC as it is a simpler form of business organization, it gives legal protection, and it may not require a separate tax return.  LLC's are not recognized as a separate type of entity by the IRS A sole member LLC may elect to be taxed as a corporation or as a sole proprietorship.  Electing the sole proprietorship route would mean the results are reported on Schedule C of your 1040.  Electing the corporate route would require filing of a corporate return and paying tax if you elected C Corp status for the LLC.

John Stancil, CPA  
Stafford
 
Posts: 44
Joined: Thu Feb 06, 2014 9:56 am


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