Author Topic: Starting an LLC or S corp to avoid self employment taxes?  (Read 6010 times)

Daleth

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Starting an LLC or S corp to avoid self employment taxes?
« on: December 01, 2016, 07:44:29 AM »
Hello all, I have a new gig in my lawyer career. Technically it's self employment, but I don't handle admin, billing, or getting clients--another company does that, feeds the work to lots of lawyers, and then we all bill monthly by the hour. So, should I start an LLC (taxed as S-corp) to run my billing through? Would that save me self-employment taxes, let me deduct the cost of health insurance, etc.?

jwright

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #1 on: December 01, 2016, 08:36:45 AM »
It depends.  In an S-Corporation, you have to pay yourself a reasonable salary (determined by several subjective factors).  You will pay the self-employment tax on that salary.  If what you are earning is equivalent to a reasonable salary, this isn't going to save you money.  Plus, you'll add the headache of having to file payroll forms for yourself.  There's also differences in retirement planning.

If you are winning large cases, I'd make the argument that your reasonable salary is much less than the total income, and therefore you'd save a good bit. 

SeattleCPA

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #2 on: December 01, 2016, 09:08:00 AM »
You can still save money even if you have to take all the profits as either wages or fringe benefits.

For one thing, some deductions (like health insurance and the employer part of a pension contribution) become deductions both for income tax purposes and and employment tax purposes if you operate as an S corporation.

For another thing, you can do things to drive down your distributions of profit which means that some of money you would have paid as wages and incurred employment taxes for don't get subjected to employment taxes. (Example: You can make charitable contributions from your S corporation.)

And there are some other factors that can generate savings, too, even in a one-shareholder, one-employee business. (Any profits you retain in business can be protected from employment taxes...)

Bottomline: I would not assume you can't do this.

This discussion of one person S corporations might help you...

http://evergreensmallbusiness.com/are-one-person-s-corporations-illegal/

Frugalman19

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #3 on: December 02, 2016, 08:05:01 AM »
You can still save money even if you have to take all the profits as either wages or fringe benefits.

For one thing, some deductions (like health insurance and the employer part of a pension contribution) become deductions both for income tax purposes and and employment tax purposes if you operate as an S corporation.

For another thing, you can do things to drive down your distributions of profit which means that some of money you would have paid as wages and incurred employment taxes for don't get subjected to employment taxes. (Example: You can make charitable contributions from your S corporation.)

And there are some other factors that can generate savings, too, even in a one-shareholder, one-employee business. (Any profits you retain in business can be protected from employment taxes...)

Bottomline: I would not assume you can't do this.

This discussion of one person S corporations might help you...

http://evergreensmallbusiness.com/are-one-person-s-corporations-illegal/

Im confused, charitable contributions are not a business deduction, they just flow through to the sch A. There is no benefit ive seen for donations from an S-corp, its the same as from your personal bank account. What do you mean by this?

jwright

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #4 on: December 02, 2016, 08:33:23 AM »
You can still save money even if you have to take all the profits as either wages or fringe benefits.

For one thing, some deductions (like health insurance and the employer part of a pension contribution) become deductions both for income tax purposes and and employment tax purposes if you operate as an S corporation.

For another thing, you can do things to drive down your distributions of profit which means that some of money you would have paid as wages and incurred employment taxes for don't get subjected to employment taxes. (Example: You can make charitable contributions from your S corporation.)

And there are some other factors that can generate savings, too, even in a one-shareholder, one-employee business. (Any profits you retain in business can be protected from employment taxes...)

Bottomline: I would not assume you can't do this.

This discussion of one person S corporations might help you...

http://evergreensmallbusiness.com/are-one-person-s-corporations-illegal/

Im confused, charitable contributions are not a business deduction, they just flow through to the sch A. There is no benefit ive seen for donations from an S-corp, its the same as from your personal bank account. What do you mean by this?

He means you are moving the income out of your S-Corp "bucket" and avoiding the SE tax instead of paying it personally.

For example, if you are a service provider and the reasonable compensation rules would mean that you need to take 100% of your earnings as salary; you make the contribution from the S-Corp and you have less available to you to be considered salary and be hit with SE tax. 

Business makes $50,000 --> $50,000 wages to owner on which she pays SE tax --> owner donates $1,000 to charity
Business makes $50,000 ---> business donates $1,000 to charity --> $49,000 in wages to owner on which she pays SE tax

SeattleCPA

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #5 on: December 02, 2016, 10:16:11 AM »
Jwright and I agree, I think. But because i'm responsible for the confusion, let me add to the explanation with a longer example...

Suppose that you run a sole proprietorship making $100K in profits. All of that profit will be subject to the 15.3% self-employment tax calculations. (Refer to Schedule SE instructions for details of course...)

Further suppose that you would need to call all of the profits "wages" if you did run the business as an S corporation... Does this mean therefore that you can't save money with an S corporation? No, not necessarily... and the two general reasons are (1) some deductions reduce not just income taxes but employment taxes when you move them to the 1120S tax return... and (2) the IRS doesn't reclassify and can't reclassify profits as wages but only distributions as wages.

So what if you wanted to take this $100K in profits business, turn it into an S corporation, and then categorize $50K as wages. That sort of leaves another $50K that isn't wages and on which you might be able to avoid that 15.3% tax.

Here's how you might be able to make all this work...

1. Suppose in past you've paid $10K of health insurance out of your sole proprietorship profits. If you have the S corporation pay this, it bumps your wages from $50K to $60K... but you still only pay employment taxes on the $50K...

2. Suppose in past you've paid $15K a year for a pension out of your sole proprietorship profits. If you have the S corporation pay this, it uses up $15K of the remaining business profit... but you still only pay employment taxes on the $50K...

Note that after those two gambits, your leftover profit is $25K... I calculate the $25K because we start with $100K, subtract $50K for wages subject to employment taxes, another $10K for health insurance that counts as wages but which isn't subject to employment taxes, and then another $15K for the pension...

At this point, you would still have $25K of "S corporation" profit and that's the amount you might worry about being reclassified as wages if the S corporation pays that $25K out to you. However, if you have the S corporation pay out a $10K charitable contribution, though you still get a K-1 showing $25K of taxable income, that $10K isn't a distribution and isn't subject to reclassification.

Let's further assume that out of that remaining $15K of profit, you leave $5K in the business for working capital and take only that last $10K out... in this case, the IRS could come in and reclassify the $10K if you can't call *any* part of the business profit a return on the investment. But that's pretty unlikely. Note that you will have received $75K of compensation once you add up the base wages, the health insurance and the pension plan... and that you'll have only made a shareholder distribution of $10K

P.S. That $10K charitable contribution doesn't reduce the S corporation's income... but it appears on the K-1 that goes to the S corporation shareholder. The shareholder may be able to add it to his or her 1040. Also that $10K of health insurance gets taken as a self-employed health insurance deduction on the front of your 1040 return.

Frugalman19

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #6 on: December 02, 2016, 10:59:58 AM »
You can still save money even if you have to take all the profits as either wages or fringe benefits.

For one thing, some deductions (like health insurance and the employer part of a pension contribution) become deductions both for income tax purposes and and employment tax purposes if you operate as an S corporation.

For another thing, you can do things to drive down your distributions of profit which means that some of money you would have paid as wages and incurred employment taxes for don't get subjected to employment taxes. (Example: You can make charitable contributions from your S corporation.)

And there are some other factors that can generate savings, too, even in a one-shareholder, one-employee business. (Any profits you retain in business can be protected from employment taxes...)

Bottomline: I would not assume you can't do this.

This discussion of one person S corporations might help you...

http://evergreensmallbusiness.com/are-one-person-s-corporations-illegal/

Im confused, charitable contributions are not a business deduction, they just flow through to the sch A. There is no benefit ive seen for donations from an S-corp, its the same as from your personal bank account. What do you mean by this?

He means you are moving the income out of your S-Corp "bucket" and avoiding the SE tax instead of paying it personally.

For example, if you are a service provider and the reasonable compensation rules would mean that you need to take 100% of your earnings as salary; you make the contribution from the S-Corp and you have less available to you to be considered salary and be hit with SE tax. 

Business makes $50,000 --> $50,000 wages to owner on which she pays SE tax --> owner donates $1,000 to charity
Business makes $50,000 ---> business donates $1,000 to charity --> $49,000 in wages to owner on which she pays SE tax

It is the same thing

Business makes $50,000 --> chose to only take $49,000 as wages ---- take $1,000 as a distribution, not subject to SE tax and donate from personal account.

Frugalman19

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #7 on: December 02, 2016, 11:07:59 AM »
Jwright and I agree, I think. But because i'm responsible for the confusion, let me add to the explanation with a longer example...

Suppose that you run a sole proprietorship making $100K in profits. All of that profit will be subject to the 15.3% self-employment tax calculations. (Refer to Schedule SE instructions for details of course...)

Further suppose that you would need to call all of the profits "wages" if you did run the business as an S corporation... Does this mean therefore that you can't save money with an S corporation? No, not necessarily... and the two general reasons are (1) some deductions reduce not just income taxes but employment taxes when you move them to the 1120S tax return... and (2) the IRS doesn't reclassify and can't reclassify profits as wages but only distributions as wages.

So what if you wanted to take this $100K in profits business, turn it into an S corporation, and then categorize $50K as wages. That sort of leaves another $50K that isn't wages and on which you might be able to avoid that 15.3% tax.

Here's how you might be able to make all this work...

1. Suppose in past you've paid $10K of health insurance out of your sole proprietorship profits. If you have the S corporation pay this, it bumps your wages from $50K to $60K... but you still only pay employment taxes on the $50K...

2. Suppose in past you've paid $15K a year for a pension out of your sole proprietorship profits. If you have the S corporation pay this, it uses up $15K of the remaining business profit... but you still only pay employment taxes on the $50K...

Note that after those two gambits, your leftover profit is $25K... I calculate the $25K because we start with $100K, subtract $50K for wages subject to employment taxes, another $10K for health insurance that counts as wages but which isn't subject to employment taxes, and then another $15K for the pension...

At this point, you would still have $25K of "S corporation" profit and that's the amount you might worry about being reclassified as wages if the S corporation pays that $25K out to you. However, if you have the S corporation pay out a $10K charitable contribution, though you still get a K-1 showing $25K of taxable income, that $10K isn't a distribution and isn't subject to reclassification.

Let's further assume that out of that remaining $15K of profit, you leave $5K in the business for working capital and take only that last $10K out... in this case, the IRS could come in and reclassify the $10K if you can't call *any* part of the business profit a return on the investment. But that's pretty unlikely. Note that you will have received $75K of compensation once you add up the base wages, the health insurance and the pension plan... and that you'll have only made a shareholder distribution of $10K

P.S. That $10K charitable contribution doesn't reduce the S corporation's income... but it appears on the K-1 that goes to the S corporation shareholder. The shareholder may be able to add it to his or her 1040. Also that $10K of health insurance gets taken as a self-employed health insurance deduction on the front of your 1040 return.

Very interesting, well put. If you have been running yourself as a sch c, and you have made close to $200,000 this year as a real estate agent, would it be worth it to play this game? could i start an s-corp in December and do payroll for $90k and take the rest as distribution? or does it ave to be from the beginning of the year?

Cpa Cat

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #8 on: December 02, 2016, 11:35:43 AM »
Very interesting, well put. If you have been running yourself as a sch c, and you have made close to $200,000 this year as a real estate agent, would it be worth it to play this game? could i start an s-corp in December and do payroll for $90k and take the rest as distribution? or does it ave to be from the beginning of the year?

You wouldn't just want to set your S Election to be effective December 1, because then 11/12ths of your income would be on Schedule C and only December's income would hit your S Corp.

You'd either want to make a late S-election and make it retroactive to Jan 1, 2016 (which you can probably do), or make a new S election effective Jan 1, 2017.

I'm not commenting on whether or not $90k is a reasonable salary.

SeattleCPA

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #9 on: December 02, 2016, 12:40:59 PM »
Late S elections work... though IMHO it's not really a DIY project. (You want to reference the right Rev. Proc and then tailor your excuse, etc.)

And, sorry, they can be messy. The two common problems with a late decision to go "S corp" are:

 (1) you need an eligible entity in place on 1/1/2016 in order to make the election effective on 1/1/2016. BTW, if you had an LLC in place on 1/1/2016, that works. But just to be clear, you can't form an LLC today (12/2/2016) and then make a late S election with a 1/1/2016 effective date. (BTW, people do try this. And some sloppy or ignorant accountants sometimes do it and get away with. But if you get caught, you're toast.)

(2) you need to get to a reasonable compensation number paid to your shareholder-employee in the next 29 days so you have reasonable compensation for 2016. Note that it's pretty easy to put $16K into the fourth quarter because that only requires a  $2448-ish payroll tax deposit and because that's considered "small" you can make the payroll tax deposit with your quarterly 941 form when you file that in January 2017... (With this approach, you'd essentially say that $16K of payments to the shareholder in Q4 were really for wages)... but you need to do WAY more than $16K for year. E.g., if you wanted to pay your shareholder employee $60K in wages for Q4 because you hadn't paid him or her wages earlier in the year, you probably need at least $64,590 of cash you can pay out in payroll tax deposits and in wages to your shareholder-employee. Note, too, that because you'll owe at least $9180 in payroll taxes (15.3% on the $60,000) you'll need to have your eftps.gov account all set up.

All that said, lots of real estate agents and brokers would do an S corp in a situation like yours and save taxes. You especially should handle stuff like the health insurance and SEP contribution right.

« Last Edit: December 02, 2016, 01:31:22 PM by SeattleCPA »

Cpa Cat

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #10 on: December 02, 2016, 03:12:30 PM »
Late S elections work... though IMHO it's not really a DIY project. (You want to reference the right Rev. Proc and then tailor your excuse, etc.)

I agree with Seattle. It's a possibility, but... making a late election - assuming you're eligible - comes with the requirement that your entity has been acting consistently with being an S-Corp all year. There are a bunch of things that go into that. For example, I would not do a late S-election for someone who did not have a separate business bank account all year long. But there are also issues with health insurance reimbursements, other expense reimbursements, cash flow for salary, etc.

But if it's an eligible entity AND it's been run cleanly and consistently with being an S-Corp AND cash flow permits the straightening out of reasonable comp and reimbursements - it's something to consider.

jwright

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #11 on: December 05, 2016, 09:45:44 AM »
You can still save money even if you have to take all the profits as either wages or fringe benefits.

For one thing, some deductions (like health insurance and the employer part of a pension contribution) become deductions both for income tax purposes and and employment tax purposes if you operate as an S corporation.

For another thing, you can do things to drive down your distributions of profit which means that some of money you would have paid as wages and incurred employment taxes for don't get subjected to employment taxes. (Example: You can make charitable contributions from your S corporation.)

And there are some other factors that can generate savings, too, even in a one-shareholder, one-employee business. (Any profits you retain in business can be protected from employment taxes...)

Bottomline: I would not assume you can't do this.

This discussion of one person S corporations might help you...

http://evergreensmallbusiness.com/are-one-person-s-corporations-illegal/

Im confused, charitable contributions are not a business deduction, they just flow through to the sch A. There is no benefit ive seen for donations from an S-corp, its the same as from your personal bank account. What do you mean by this?

He means you are moving the income out of your S-Corp "bucket" and avoiding the SE tax instead of paying it personally.

For example, if you are a service provider and the reasonable compensation rules would mean that you need to take 100% of your earnings as salary; you make the contribution from the S-Corp and you have less available to you to be considered salary and be hit with SE tax. 

Business makes $50,000 --> $50,000 wages to owner on which she pays SE tax --> owner donates $1,000 to charity
Business makes $50,000 ---> business donates $1,000 to charity --> $49,000 in wages to owner on which she pays SE tax

It is the same thing

Business makes $50,000 --> chose to only take $49,000 as wages ---- take $1,000 as a distribution, not subject to SE tax and donate from personal account.

But if you do it that way you are affecting reasonable compensation.  If the business makes the contribution, then 100% of the income is considered wages.  I have heard the argument several times that all personal service income should be considered SE income (though I don't necessarily agree).  You aren't taking the chance if the business makes the contribution.

Cpa Cat

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #12 on: December 05, 2016, 10:23:17 AM »
But if you do it that way you are affecting reasonable compensation.  If the business makes the contribution, then 100% of the income is considered wages.  I have heard the argument several times that all personal service income should be considered SE income (though I don't necessarily agree).  You aren't taking the chance if the business makes the contribution.

Agreed. The argument that all personal service income is SE income gets bounced around accounting forums occasionally too. But keep in mind that most Tax Court cases have not made that argument.

Look at it from the perspective of myself - a sole proprietor CPA.

I could get a job at an accounting firm and they would pay me a decent living, and I would show up for work every day and plug away at whatever I was told to do. Maybe I would make $50/hr while the firm bills $200/hr for my services. But wait... where did that extra $150 go? Some of it went to overhead, but a lot of it went to profit for the owners. They got this profit because they have taken the risk, they own the client list, they own the reputation of the firm, etc.

So if I am now self employed and I bill $200/hr - is $200/hr suddenly my reasonable compensation? Or is $50/hr still my reasonable compensation? As an owner of my firm, I am entitled to a return on my investment. I have taken a lot of risk. I had to forego income to build this firm up. There are other factors at play besides just my labor. The line between Cpa Cat and Cpa Cat's Firm might be harder to see, but it still exists.

Now, for realtors, this is a harder discussion. There's no industry standard of W-2 paid realtors to compare oneself to. But the guidelines, court cases, and knowledge base exists for me to spend time figuring out a reasonable comp number that is less than 100%.

SeattleCPA

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #13 on: December 05, 2016, 11:37:20 AM »
It is the same thing

Business makes $50,000 --> chose to only take $49,000 as wages ---- take $1,000 as a distribution, not subject to SE tax and donate from personal account.

Hope I got the right quotation... Sorry, Awgolfer, if it's not you...

But I think maybe one of the two important points is getting missed here.

If you make a $1000 distribution to the shareholder and the shareholder then uses that money to make a charitable contribution, shareholder probably gets a charitable contribution deduction... BUT shareholder might in a worst case scenario have IRS come in and recategorize that $1000 as wages if the S corp hadn't paid reasonable wages to the shareholder.

However, if S corp just doesn't make the distribution to the shareholder, if the S corp instead contributes directly to the charity, the charity still gets the contribution, and the shareholder still probably gets a charitable contribution deduction... but because the IRS doesn't have an actual distribution they can recategorize, the IRS can't call that $1,000 wages.

One needs to remember that profits needs to be distributed to shareholder in order to be at risk for being recategorized as wages.

trollwithamustache

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #14 on: December 07, 2016, 09:18:10 AM »
This can be very state specific.  For those of us in California there is a minimum $800 tax on corporations, so even if you S-corp has no profits after passing everything through to your tax return, the corporation still has to pay the 800 bucks. There may be additional rules on which professions can use which business structure that vary by state.

Also for the type of folks that hang out on this website there is likely minimal tax benefit to a S-corp. Assuming you are high income, and want to make the maximum contribution to a 401k (the personal + business contribution at ~52k) you have to pay yourself something like 126k in W-2 salary.  So, a lot of the S-corp strategies for low salary, high payout on a K-1 may not apply.


SeattleCPA

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #15 on: December 07, 2016, 02:11:20 PM »
I actually think a lot of people here might be in one of the sweet spots for an S corporation... a solid high five figure self-employment income situation.

I discuss the math here:

http://evergreensmallbusiness.com/blue-collar-s-corporations/

BTW, totally agree that the California S corporation franchise tax makes a big difference to some small business owners--though usually not the five figures of profits situation.

chucklesmcgee

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #16 on: December 09, 2016, 01:45:49 PM »
If what you are earning is equivalent to a reasonable salary, this isn't going to save you money.


If what you are earning is on the cusp of a reasonable salary, this isn't going to save you money. A reasonable salary is highly subjective. Sure, if you pay yourself a trivial amount of total income, say $24,000 as salary and try to take $200,000 as dividends you're going to find yourself in hot water. Just because you're making a salary that's reasonable doesn't mean you couldn't reduce your salary and still be paid a reasonable salary.


http://www.forbes.com/sites/anthonynitti/2014/02/04/tax-geek-tuesday-reasonable-compensation-in-the-s-corporation-arena/5/#6dd35f1d39c2


This article has a decent summary of tax court cases. Note that all of these cases involve instances where individuals pay themselves salaries that would be considered suspiciously low for any skilled profession. Watson vs. Commissioner is a great example.  Dude tries to pay himself $24k when he has ~$225k as compensation due to him. Court says, no, that's not reasonable. Decides $96k is a reasonable salary. He's still getting to keep over half of his compensation as dividends! What a deal! Even after the penalty in this case he's probably coming out ahead!


For our lawyerly friend over here, especially, there could be a lot of flex for what's a reasonable salary. $90k isn't crazily low for a lawyer. $400k isn't absurdly high for a lawyer either. There's going to be such a significant amount of flex that a substantial amount of tax savings could be achieved. Obviously consult a tax lawyer, but I wouldn't dismiss the tax savings immediately.

SeattleCPA

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #17 on: December 09, 2016, 02:30:10 PM »
If what you are earning is equivalent to a reasonable salary, this isn't going to save you money.


If what you are earning is on the cusp of a reasonable salary, this isn't going to save you money. A reasonable salary is highly subjective. Sure, if you pay yourself a trivial amount of total income, say $24,000 as salary and try to take $200,000 as dividends you're going to find yourself in hot water. Just because you're making a salary that's reasonable doesn't mean you couldn't reduce your salary and still be paid a reasonable salary.


http://www.forbes.com/sites/anthonynitti/2014/02/04/tax-geek-tuesday-reasonable-compensation-in-the-s-corporation-arena/5/#6dd35f1d39c2


This article has a decent summary of tax court cases. Note that all of these cases involve instances where individuals pay themselves salaries that would be considered suspiciously low for any skilled profession. Watson vs. Commissioner is a great example.  Dude tries to pay himself $24k when he has ~$225k as compensation due to him. Court says, no, that's not reasonable. Decides $96k is a reasonable salary. He's still getting to keep over half of his compensation as dividends! What a deal! Even after the penalty in this case he's probably coming out ahead!


For our lawyerly friend over here, especially, there could be a lot of flex for what's a reasonable salary. $90k isn't crazily low for a lawyer. $400k isn't absurdly high for a lawyer either. There's going to be such a significant amount of flex that a substantial amount of tax savings could be achieved. Obviously consult a tax lawyer, but I wouldn't dismiss the tax savings immediately.

I would happily defer to any tax attorney who wants to correct me, but I don't think this is an issue where you consult a tax attorney. This is really a question for an S corp shareholder-employee to research him or herself... or a question to consult a tax accountant about.

Also, and sorry to display my compulsive personality here, but even if you have (say) $100K of profit and $100K is the right reasonable salary number, you still might be able to save substantial amounts of payroll taxes by setting your salary to $50K and then taking the other $50K as health insurance, employer pension benefits, etc.

Fuzz

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #18 on: December 26, 2016, 09:56:49 AM »
Daleth -

I don't think this is a close question. If you're going to bill over 100K/year, I'd suggest going for it. Also, I think the accountants in the forum are over-estimating what lawyers make :). In a lot of markets/practice areas, I think a 60K to 80K salary is pretty defensible.  Disclaimer: not legal/tax advice specific to you. I do think it's worthwhile to make sure that your entity is paying you through a payroll service. I think if you price shop on that you can get it down to $10 to $50/month. I like gusto, but I think ADP has a cheaper option.

SeattleCPA

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Re: Starting an LLC or S corp to avoid self employment taxes?
« Reply #19 on: December 27, 2016, 11:47:47 AM »

... Also, I think the accountants in the forum are over-estimating what lawyers make :). In a lot of markets/practice areas, I think a 60K to 80K salary is pretty defensible.

I would guess that many small firm lawyers produce numbers similar to what shows in the attached table of average S corporation salaries for the "professional, scientific and technical services" category:

http://www.scorporationsexplained.com/average-s-corporation-salaries.htm

I think if you price shop on that you can get it down to $10 to $50/month. I like gusto, but I think ADP has a cheaper option.

I think Gusto costs more like $30 a month and ADP is more than that. But for the record, I heartily, heartily endorse Fuzz's idea to outsource payroll.