Rich_by_the_Bay
Moderator Emeritus
One of my favorite scenarios for when I semi-FIRE is to do locum tenens - short, temporary coverage work all over the country. I'd probably do it about .3 to .5 time, with my income designated to live off of while my nest egg grows (hopefully) for a few more years. The hourly wages are mediocre for my field, but all expenses are covered.
It occured to me that this will be self-employed income, and I assume I'd thus pay my usual federal tax plus the 15.x% self-employment tax. Yikes. And maybe even have to pay out-of-state state income tax if the work is done elsewhere. I could easily end up in the 35-40% range, if I am understanding this right.
So, I'm thinking about an S corporation. Since I'll likely be pulling out pretty close to what I'll be earning (I'll need it, plus it would be hard to justify a salary much lower than what I'm actually going to get paid hourly) there won't be much nonwage "distributive" income in the corp. I understand that my wages will be subjecti to self-employment tax even via an S corp.
Before I go see my accountant and lawyer about this, I'm trying to get a sanity check on whether it makes sense, what questions to ask, and so on. Is an S corp reasonable in this situation? Other ideas? With a 35% tax hit, it may not be worth my trouble - might be better off just getting part-time employment, though that doesn't sound half as much fun.
It occured to me that this will be self-employed income, and I assume I'd thus pay my usual federal tax plus the 15.x% self-employment tax. Yikes. And maybe even have to pay out-of-state state income tax if the work is done elsewhere. I could easily end up in the 35-40% range, if I am understanding this right.
So, I'm thinking about an S corporation. Since I'll likely be pulling out pretty close to what I'll be earning (I'll need it, plus it would be hard to justify a salary much lower than what I'm actually going to get paid hourly) there won't be much nonwage "distributive" income in the corp. I understand that my wages will be subjecti to self-employment tax even via an S corp.
Before I go see my accountant and lawyer about this, I'm trying to get a sanity check on whether it makes sense, what questions to ask, and so on. Is an S corp reasonable in this situation? Other ideas? With a 35% tax hit, it may not be worth my trouble - might be better off just getting part-time employment, though that doesn't sound half as much fun.