Hello Mr. Schwartz. Thank you for your reply. I would like to set up a corporation (not sure if it does provide any protection of assets in case of any lawsuits - since I will be the only shareholder). Does the S election give me any benefit? I pay all my insurances (malpractice and disability) myself. Will these expenses and medical insurance be deductible in an S corp?
I agree with you to incorporate in January. Once that is done, should I have my monthly income check written to the corporation? Does there need to be any formal agreement between the dental practice and my S corp regarding this?
What kind of expenses can I claim against the contractor income for this year? Also, I have no idea how to and where to go to set up a 401K. Can you please guide? I did some research and found that I could contribute upto 49K (i make about 200K).
Thanks a lot for your help. I appreciate it so much.

Zip Code: 23223

Call me Andrew please.

With respect to your questions, I think a lot of them are issues for you to discuss with a lawyer. That being said:

1. I think you should definitely elect S-Status for the corporation. There are a few huge tax pitfalls associated with remaining a C-Corp. Even so, there are a few advantages to remaining a C-Corp, such as being able to deduct your disability insurance premiums and certain health expenses. I do have a few clients who have decided to not elect S-Status to be able to deduct these types of expenses.

2. You should pay all of your professional expenses through your corporation. We have a listing available at www.mdtaxes.com/mdbusexp.html You should also be able to write off the health insurance premiums that you pay - provided you aren't eligible to participate in another employer's plan or your spouse's plan if you are married.

3. There should probably be a formal Independent Contractor Agreement between your corporation and the practice where you work.

4. And for the Solo 401k, you will only want to set up that plan if the only way you'll be able to hit the $49k threshold is if you are able to put away salary deferrals of $16.5k. With a SEP, you can put away 25% of your W-2 wages. So, depending on how much you will pay yourself through your corporation, you might be able to hit the $49k limit with just a SEP. Avoiding the Solo 401k will save you some paperwork and headaches down the road.


If you want to set up a time to speak over the phone about all these issues, please let me know. You can find my contact info at www.schwartzaccountants.com.

Zip Code: 01801

Also...would you still recommend setting up a solo 401k this year if I am going to be working as a fully time employee for that employer next year?

Zip Code: 23223

Are you working as an employee at your corporation, or at another dental practice?

If you will be an employee of your own practice, you will only set up a Solo 401k if that's how you can hit the $49k annual limit for retirement plan contributions. S-Corps can set up a Solo 401k for its owner if the owner (and spouse) are the only employees who work more than 1000 hours per year for the practice.

If you will be working as an employee at another practice, I'm not sure it makes sense to incorporate. Check out my article - To Incorporate Or Not To Incorporate available at: http://www.mdtaxes.com/news0705.html.

Zip Code: 01801