199A DEDUCTION QUESTION

[xnyjets80x]

Hello I formed a professional LLC with S-Corp status for myself in NY with no other employees and had a few questions in regards to the best way to allocate wages vs dividend for the purposes with the new pass through deduction 199a. I am a single filer with no children in a "service industry" and I am trying to get my taxable income down to $157,500 (the max to qualify for 20% deduction without phase out). My gross income will be around $430,000 going into the S-Corp. I am not an accountant by any means but these were my thoughts:

$198,000 to pay myself as wages to get down to $157,500 taxable income after deductions ($40,500) which I listed below:
$12,000 standard deduction +
$18,500 401k contribution (or would it be $55,000 as I opened up solo 401k and contributed the max I wasn't clear as $18,500 is employee contribution and the remaining $36,500 is employer contribution?) +
$10,000 Employee Medicare/Social Security

That would leave me with a dividend QBI of $232,000. 20% of the $232,000 is $46,400 in deduction which taxed at the 24% federal and 6.65% NY state is $14,221.

The questions I have are :
1. Did I calculate my taxable income correctly or did I include a deduction I should not have or did I forget to add an additional deduction?
2. Since I am the business owner and only employee does the money I allocated as the dividend count towards my taxable income?
3. In deducting solo 401k from taxable income do I only deduct the employee part only of $18,500 or the total $55,000?
4. Would the $198,000 I pay myself in NY be a "reasonable salary" for IRS?
5. Did I calculate this algorithm in general correctly?

Thank you in advance and all of your advice and insight is much appreciated

[SeattleCPA]

I don't understand your numbers. But if you're in an SSTB, single and your taxable income exceeds $207,500, you don't get a Section 199A on the income from the PLLC income.

But be sure you're really an SSTB. Lots of people think they are but aren't.

https://evergreensmallbusiness.com/section-199a-qualified-business-income-deduction-danger-zones/

Also the right salary to pay is 28.5714% of your profit before salary. That's the optima. More info in these two posts...

https://evergreensmallbusiness.com/s-corporation-section-199a-deduction/

https://evergreensmallbusiness.com/s-corporation-shareholder-salaries-sec-199a-deduction/

[feelingroovy]

I also have a service business LLC in NY taxed as an S Corp.

A few clarification questions and some answers:

You said 430k is your gross income. Is that the business's s gross or yours personal. In other words, is any of that from a different source?

Did the business have any expenses? Equipment, office supplies or rent, mileage, etc? You are listing personal deductions, not business ones. Or is 430 k net income, not gross?

I don't have a solo 401 k but my understanding is the 55k is 18.5 employee contribution and the rest employer. Both are deductable.

And yes the dividend is part of your taxable income.

What is a reasonable salary depends on what you do. So if you hired someone in your city with your job title, what would you have to pay them?

And I could be wrong but I believe what you pay yourself in salary has to go through payroll. So there should be payroll taxes in there. Is it possible to retroactively run payroll for the previous year?

I would think you really need to talk to a CPA. It would pay for itself easily.