How would you go about this?

[JeffKeane]

Hi All - long time off & on lurker, first time poster. Wondering if anyone has either been in this situation before or even if not, how they'd go about optimizing this experience [legally ideally but not opposed to hearing about other options. No judgement just looking for pure information here].

I work as a contractor (1099) in the US. I make roughly 170k pre tax, and end up paying 80k between income/state/medical/social security taxes. I have very few deductibles as I'm single, non property owning, and my work pays for what I need to do the job [computer, software etc].

I feel like I'm getting boned @ taxes, I'm sure most people do, but I'm just looking to see if there's something I could/should be doing to be boned slightly less. Should I have an accountant or is it not worth it? Should I setup a company (looked into it, but a US LLC would be classified as pass-thru and there'd be 0 tax difference, same with scorp), should I relocate / try to obtain residency elsewhere (if so where+/how?). Have a roth IRA but can't contribute because my income is above the limit.

Appreciate everyone's time and any guidance on the matter. Happy to clarify any information that'd be useful to make a more accurate recommendation. Cheers!

 

[uplana]

Your situation is similar to what have been asked around here a few times before. Everything below 500K euro (according to Mr. @Martin Everson ) make no sense to relocate for. You want to find an accounting firm that is able to reduce your taxes maybe or tell you what to do to reduce them.

You need to consider the costs for relocation and your lifestyle as well as much more, it's not always about taxes alone.

 

[Fulton Abraham Sanchez]

Hello Jeff. You are paying self employment tax 15% when you wotk independent 1099. Open a SCorp. This will save you 15% SE tax, BUT you must do a payroll with at least 40K and pay SS and Medicare your half and let the SCorp pay the other half. Out of the 80K you get, 40K payroll and the other 40K will be taxable at you regular income tax rate.

If you open a LLC, the 40K will be taxed 15% SE tax in addition to regular income tax.

In general, LLCs are not good for active income like consulting, etc because it creates self employment tax 15%. LLCs are good for passive income such as real estate rental income.

 

[startfleetio]

if you are doing above 100K yearly, it make sense to open an LLC and be taxed as a S-Corp.