ChooseFI 409 | 401(k), Mega Backdoor Roth and the Premium Tax Credit | Sean Mullaney
Self-Employment Leap
- Don't let tax and retirement planning stop you from self-employment.
- You can overcome challenges with knowledge and planning.
Self-Employment Taxes
- Self-employed individuals pay both income tax and self-employment tax.
- Self-employment tax replaces payroll taxes, contributing to Social Security and Medicare.
Estimated Tax Payments
- Make estimated tax payments quarterly to avoid penalties.
- Use the IRS website or your state's website for easy payments.
In this episode: w2 employment to self-employment, s-coporations vs self-employment, avoiding penalties, megas backdoor roths, retirement planning, and health insurance.
Most of us are familiar with a W2 job, and there is a certain level of convenience that comes with working a W2 job as it relates to retirement planning and taxes. So much so that it can be daunting to want to embark out on your own journey and have to figure it all out on your own. This week we are re-joined by our “in-house tax expert” Sean Mullaney to discuss the tax and retirement sphere as it relates to being self-employed. While we are not offering advice, this week's episode is meant to act as a resource to listeners curious about the steps and unknowns that come with the self-employment territory. With the same excitement and motivations gained from getting to run your own business, those same motivations and excitements can still be applied to navigating your retirement and taxes once you remember that it is now within YOUR control! The fear of the unfamiliar may not be as daunting and complicated as you may think, and figuring out these factors requires you to take the same initiative and action that is required throughout your entire FI journey!
The discussion is intended to be for general educational purposes and is not tax, legal, or investment advice for any individual.
Sean Mullaney:
- Website: fitaxguy.com
- Book: Solo 401k; The Solopreneur's Retirement Account
Timestamps:
- 1:42 - Introduction
- 2:38 - W2 Employment to Self-Employment
- 11:34 - S-Corporations vs Self-Employment
- 14:03 - Avoiding Penalties When Making Estimated Payments
- 19:29 - Saving For Retirement As An Entrepreneur
- 24:00 - Employee vs Employer 401k Limits and Mega Backdoor Roth
- 33:54 - Is The Mega Backdoor Plausible For The Self-Employed?
- 41:03 - Roth IRA Conversions
- 43:15 - Addressing The Uncertainty Around The Employer Maximum
- 53:40 - ACA Plans and Navigating Health Insurance As A Solopreneur
- 63:34 - What Counts As Income?
- 68:41 - Conclusion
Resources Mentioned In Today’s Episode:
- Paying Taxes When You're Self-Employed
- IRS Publication 560
- IRS Form 8962 Instructions on Premium Tax Credit
- IRS Publication 974 Premium Tax Credit
- Creating Your Dream Job | ChooseFI Ep 117R
- Roth IRA Conversion Ladder Case Study | ChooseFI 163R
- Healthcare.gov ACA Plans
- Cody Garrett's Tweet Illustrating ACA Medical Insurance Premiums and PTCs
- Subscribe to The FI Weekly!
More Helpful Links and Resources:
- Earn $1,000 in cashback with ChooseFI's 3-card credit card strategy
- Share FI by sending a friend ChooseFI: Your Blueprint to Financial Independence
- Keep learning or start a new side hustle with one of our educational courses
- Commission-Free Investing with M1 Finance