Client is a mid 30’s surgeon based out of California that performs services through a PLLC. The technical term for his work is “locums”; he is a travelling doctor that works for multiple hospitals, in multiple states.
Gross income is around $1.1m this year.
If he were a W2 employee making the same amount, essentially he would be paying close to $500,000 in taxes (~45% tax rate, which includes federal and state).
My overall plan saves him about $62,000 in overall taxes, putting him at an effective tax rate of 37% ($443,000 owed on $1,178,000).
A summary of a few things we’re doing:
Solo member LLC electing to file as s-corp, with a reasonable salary/distribution determination which saves him ~$13.8k on payroll taxes;
Ensuring state payroll configurations in California and his home state (he doesn’t live in Cali) are set up properly such that he is not having taxes withheld in excess of what is required;
Setting him up with a solo 401k (pre-tax contributions) which can save him $31,000 based on his tax bracket;
Proper cash flow and tax planning to ensure payroll is run and filed quarterly, that instalments are made to meet safe harbour requirements such that no penalties will be owed in April of next year during tax season;
Capturing all business expenses through the PLLC, including travel, automobile, and miscellaneous expenses incurred for the purposes of incurring business income. Even if he had $25,000 of expenses to claim, that saves him roughly $10k in taxes;
Itemized deductions - mortgage, etc.
Optimizing for taxes is the least glamourous task and not my favourite part of the job, but always needs to be done for each and every client.
The more fun part is figuring out how we will build him a portfolio and allocate the excess income.
Acquiring short-term rentals (AirBNBs)
Paying off student loans
Stocks and ETFs
With $200k annual investment (very conservative based on his income) in the market over the next 10 years:
Assume a baseline return of 10% (conservative based on my own investing experience);
Factoring in taxes paid inside a taxable brokerage account;
Possibly adding a few doors (real estate) on top, to generate him extra passive income
… he will be work optional in his 40’s.
Being a surgeon isn’t a clock-in-clock-out job by any means.
Important to have someone that can remove extra stress when it comes to managing and handling all the money, tax, investing, debt payoff, real estate decisions, etc…
My client also requested that I educate him on everything I do.
We’re in an era now where clients actually care about why things are done, rather than just wanting to hire “hands-off” accountants or advisors that will not go out of their way to do anything for their own clients, beyond doing the bare minimum and seeing them next year.
We have a long time horizon to work together and help him build a strong financial base.
He will never need to hire 3 separate people to manage his books and finances (a bookkeeper, a CPA, and a HNW financial advisor).
He will never need to follow market news, unless he actually wants to.
Hope you enjoyed this one.
Alice
P.S. On tax strategy alone, he is getting a 20x ROI on my fee (fully deductible for tax purposes). This is just in year 1 alone… the return will actually grow as his investments compound.
Shoot me a reply if you’re interested in how I can help you with any of the above.