For those of you that operate as an S Corp with one sharehol

[ACE]

What do you pay yourself as a 941 / w-2 employee vs. with distributions (not subject to SS / Medicare). I hear 40% / 60% is a good rule of thumb.

 

[sam miller]

Re: For those of you that operate as an S Corp with one shar

whats Your account suggest?

 

[ACE]

Re: For those of you that operate as an S Corp with one shar

whats Your account suggest?

:x That Prick. I need to call him again tomorrow. He advised my to roll over to an S corp. so I could write off 100% of my families health insurance as a business expense. He did not tell me what a terrible mess of paperwork it would make. I now have to pay $320 a year in unemployment insurance for myself. I thought I would ask the braintrust here.

 

[handdi]

Re: For those of you that operate as an S Corp with one shar

I have had a s corp several years
My acct does all the paper work
Best thing I ever did

 

[steve g]

Re: For those of you that operate as an S Corp with one shar

it really runs the gammit, but at a certain point an S corp is the only way to roll, I have seen some accountants suggest it all being dividend, some say 1000/mo salary, then others say 60-40 dist-salary ratio. its a gray area

 

[Desk Jockey]

Re: For those of you that operate as an S Corp with one shar

Yea we are close to those percentages. We take a 40-hour pay check weekly and then a monthly dividend.

 

[J Scott W]

Re: For those of you that operate as an S Corp with one shar

The IRS regs require that the salary be reasonable for the work being done. As long as you pay enough to meet that requirement, then put the rest in as a dividend.

60/40 can be a rule of thumb but it really depends upon how much profit you are making. Some guys could get a check for 60% and not even be making minimum wage.

 

[ACE]

Re: For those of you that operate as an S Corp with one shar

I spoke to my tax preparer who Is primarily a debtors attorney. His interoperation of reasonable salary was: What is the lowest reasonable amount you want to pay in social security and Medicare? He says he only pays himself a salary of 10,000.00 a year. He would probably get his rocks off arguing with the IRS over an audit but I have better things to do.

To complicate matters, the dividend tax rate is set to match the effective marginal rate on income in 2013. If that’s the case, why not just pay yourself all salary and fully fund your social security account? A corporation is probably the way to go if your income is really significant and you have time to map out a tax strategy (401k, IRA, insurance, and other tax free pircks). At this point it’s just a PIA to me :x .

 

[steve g]

Re: For those of you that operate as an S Corp with one shar

To complicate matters, the dividend tax rate is set to match the effective marginal rate on income in 2013. If that’s the case, why not just pay yourself all salary and fully fund your social security account? A corporation is probably the way to go if your income is really significant and you have time to map out a tax strategy (401k, IRA, insurance, and other tax free pircks). At this point it’s just a PIA to me :x .

I am 38 years old and by the time I am ready to collect social security it will be long gone, I would rather keep my money. the reason for still taking the dividend even if it matches the effective marginal rate is because you still get out of the 15% self employment tax beyond your set salary, why pay both?? the 15% is really the killer tax for a business owner because it taxed right off the top, no deductions like mortgage, dependants, or charitable contributions.

if a business owner has 3 kids and has a $300000 home, and he shows a profit of say 80k as an S corp taking 10k/year salary he might just get by with actually paying nothing in that example or the tax bill is likely to be less than 2 grand. if this owner is not an S corp guess what, how does 12 grand in self employment tax grab ya??

 

[ACE]

Re: For those of you that operate as an S Corp with one shar

It’s hard to see the big picture at this point. I’m working on the learning curve and need to see how it pans out after a year or two. Is all I see is more money going out at this point. It will probably cause my workers comp rate to go up as I opted to pay myself a salary of 20K.

 

[sam miller]

Re: For those of you that operate as an S Corp with one shar

To complicate matters, the dividend tax rate is set to match the effective marginal rate on income in 2013. If that’s the case, why not just pay yourself all salary and fully fund your social security account? A corporation is probably the way to go if your income is really significant and you have time to map out a tax strategy (401k, IRA, insurance, and other tax free pircks). At this point it’s just a PIA to me :x .

I am 38 years old and by the time I am ready to collect social security it will be long gone, I would rather keep my money. the reason for still taking the dividend even if it matches the effective marginal rate is because you still get out of the 15% self employment tax beyond your set salary, why pay both?? the 15% is really the killer tax for a business owner because it taxed right off the top, no deductions like mortgage, dependants, or charitable contributions.

if a business owner has 3 kids and has a $300000 home, and he shows a profit of say 80k as an S corp taking 10k/year salary he might just get by with actually paying nothing in that example or the tax bill is likely to be less than 2 grand. if this owner is not an S corp guess what, how does 12 grand in self employment tax grab ya??

I'll take it and do Save your money boys!