Side Hustles: Tax Basics for Doctors - DM 93
- noemedagatan
- Jun 25, 2024
- 2 min read
What if you have a side hustle or are moonlighting? Hey, it's Jon from Financial MD, and welcome to today's Didactic Minute.
Now a side hustle is just a fancy word for being self-employed outside in addition to your current job. Now a lot of doctors will think about this because they can do some moonlighting during residency. Some programs allow it; some don't. Or as you get on to an attending, maybe your hours are somewhere you can manage them, you've got W-2 income, and you get an opportunity to get some good hourly rate working in urgent care, reading some charts, doing some telehealth – those all sorts of opportunities for some side hustles. And a great way to maybe pay down some debt, pool extra savings in, save up for that cottage – any of those kinds of things. But what are the implications of it?
So number one – most people know this – you've got to set aside your own taxes. You're going to get something called a 1099 at the end of that year from whomever you're doing the work for. And so that 1099 could have yourself listed as the payee, or if you did an LLC which sometimes is a recommendation – we can talk about that in another video – but they're going to send the 1099 to the LLC. Either way, it's called a pass-through entity. You're taxed the same, okay? So you've got to pay your federal income taxes plus state taxes, if they're applicable, plus FICA which is Social Security and Medicare taxes – that's another 15.3 percent. You've got to pay for that. So, you got to kind of factor in. It depends on what your income is. I can't really say for everybody how much to set aside but you should be setting aside something. And you might have to actually send in quarterly estimates. So, you need to be sitting down with a tax planner as soon as you start doing a side hustle or moonlighting or independent contractor and figure out a plan to do this and get in some automations to make that happen. I highly recommend Mike Michalowicz's book, Profit First. That is a great system for independent contractors, self-employed, to make sure that you've always got enough to pay yourself, to pay the IRS, to pay business expenses, and always have a profit.
So, check that out. We'll try to put a link below in the description. And if you've got some comments on some good, bad, and ugly of how your side hustles have gone, please post that below. Help other young docs.
It's Jon from Financial MD, we'll see you next time.
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