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Welcome to the latest episode of the Physician Cents Podcast, where we explore complex financial topics tailored specifically for physicians. Whether you're a medical student, resident, fellow, or attending physician, you're going to find valuable insights that can help you increase your financial IQ, further your financial journey, and improve your overall well-being. Hosted by Chad Chubb and Tyler Olson, let’s dive in!
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Moonlighting refers to taking up additional work outside your primary employment, often to earn extra income. Examples include consulting, expert witness testimony, medical record review, or side consulting. As a physician, you have unique skills that can create various opportunities to supplement your primary income stream.
When you start moonlighting or taking on side gigs, the extra income can be tempting. However, it’s crucial to engage in proper financial planning from the get-go. Here are key aspects you need to consider:
When you take a side gig that or moonlighting work is not processed through your current employer's payroll system, it usually results in 1099 income. Handling 1099 income involves more responsibilities than routine W2 income. You are liable for not just federal and state income taxes but also self-employment taxes.
Understanding how much to set aside for taxes is crucial. If you’re in training, set aside 30% of your additional earnings. If you’re out of training, aim for 40%. Not doing this can lead to a big, demoralizing tax bill and even penalties.
Managing your tax obligations with 1099 income means paying quarterly estimated taxes. Here's a quick guide:
Understanding the schedule for quarterly tax payments is essential:
Failure to follow this schedule results in penalties and interest charges, severely impacting your income.
Skipping quarterly tax payments or underpaying can lead to penalties and interest rates as high as 8%. These charges quickly add up, making compliance non-negotiable.
As a 1099 contractor, you bear full responsibility for self-employment tax, amounting to 15.3% for Social Security and Medicare. This is in addition to administrative costs like accounting and managing your extra paperwork. Hiring a professional accountant can streamline this process, though it adds another layer of cost.
Earning 1099 income opens up new investment options, including Solo 401(k)s and SEP IRAs. These accounts allow you to take tax deductions on contributions and invest in a retirement-friendly manner.
Combining 1099 income with smart investment strategies can supercharge your retirement savings. Consider maxing out contributions to your retirement accounts to take advantage of tax benefits, facilitating a more robust financial future.
When handling 1099 income, you may also consider funding a Backdoor Roth IRA. While SEP IRAs and Simple IRAs come with limitations for this strategy, Solo 401(k)s can provide more flexibility when executed correctly.
Setting up an LLC for your side gig can bring multiple benefits:
Transitioning to 1099 income also means losing employer-provided group benefits. Independent health insurance can be costly, but it's a necessary step for ensuring comprehensive coverage.
Without employer-provided plans, you must secure adequate life and disability insurance independently. Ensure these are in place to protect your financial future.
Managing 1099 income involves additional administrative tasks, including tracking income and expenses, filing taxes, and managing investment accounts. Stay organized to mitigate the extra workload.
Moonlighting and side gigs offer an excellent opportunity to gain entrepreneurial skills. Understanding business operations and financial management can empower you for future financial independence, making the complexities well worth the effort.
Above all, maintain a balance between your primary job and your side gigs. Avoid burning out by setting clear boundaries and prioritizing personal well-being.
In conclusion, moonlighting and side gigs bring exciting opportunities for additional income and professional growth. However, they come with complexities that require careful management. Whether it's setting aside money for taxes, exploring new investment options, or ensuring comprehensive insurance coverage, planning and professional advice are essential. Remember, you don’t have to do it alone.
The best of the best list is a paid sponsorship, but these are professionals/companies that Tyler and Chad collaborate with within their own practices or have been vetted to earn a spot this list. By supporting our sponsors, it allows Chad & Tyler to dedicate more time to you and the Physician Cents community. If you ever have a question (or not a great experience, which we don’t expect!) about a sponsor, please let us know. We call it the “best of the best” for a reason, and we will maintain that standard for our listeners & viewers.
This information is for general purposes only. This information is not intended to be a substitute for specific professional financial, tax, or legal advice, as individual circumstances vary. Please see a financial professional, CPA, and/or an attorney in regards to your own individual situation.
Wealthkeel’s Advisory Services and Financial Planning offered through Vicus Capital, Inc., a Federally Registered Investment Advisor. WealthKeel LLC, 615 Channelside Drive, Suite 207, Tampa, FL 33602 -- 267.590.9533.
Olson Consulting LLC, Offering Advisory Services and Financial Planning, is a State-Registered Investment Advisor
A podcast designed specifically for physicians, offering a breakdown of complex financial topics to help you develop your financial IQ, further your financial journey, and improve your well-being. Whether you're a medical student, resident, fellow, or attending physician, you're sure to learn something new that will benefit your journey.
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