Hello,

I am will be starting my first post residency employment this July. As your aware, that puts me in a major tax bind? I also moonlight a considerable amount and am paid without deduction of taxes.

First, I'm glad that moonlighting doens't deduct taxes. I have saved all that tax free cash and invested in so far for a 20% return. Risky, but if I was conservative, I would had still hada 5% gain. So when it's time ot give the cash back to the gov't as taxes, I got essentially a 1 year loan for free. This tip is for all moonlighters. Don't spend the taxed portion, save it and invest it low risk for a return.

But anyway, I will be hit with a huge tax bill. Another moonlighter told me to set up a corp and deduct a lot of expenses. The corp would be called John Smith Consulting LLC. Then moonlight under that name, buy/lease a car under that company, collect speaking fees under this corp, and anyother ancillary arrangements I can make under this LLC. Plus, since I will be doing speaking, I should be albe to find many more justifyingable deductions ,like meals, short trips, etc.

First, is this legal? Second, can I incorporate for moonlighting income purposes?

Thanks
PS: remember all moonlighters, invest you tax free dollars while you have it.

I generally don't recommend that moonlighters incorporate as a way to save taxes. Any expense that is deductible to a corporation is also deductible to a sole proprietor. Plus, certain expenses such as the home office deduction and vehicle expenses are easier for sole proprietors to claim.

Every business decision comes down to a cost/benefit analysis, and for moonlighters, I just don't see how the tax benefits of incorporating outweigh the costs. (A lawyer might be able to show you that you will protect yourself from certain risks by incorporating.)

I have written an article for the July newsletter about whether it makes sense for people who do some moonlighting or consulting on the side to incorporate. That article will be posted as part of the MDTAXES monthly newsletter on July 1st. Please hold off incorporating until you read my article.

Zip Code: cpa@mdtaxes.com