I have mad respect that you are giving people your time and knowledge. It's a huge help. It's awesome that there's still some people out there that enjoy actually helping people. Great job never loose that spark.
I enjoy that he's giving people the (liabilities) for the topics most people who speak about with such joy and glee... They never talk about the "problems" with an s corp, they speak of it as a solution. It sounds like it's only a solution for a biz that's going to have employees other than the owner. Becoming an employee yourself makes sense then. As a single person enterprise folks have enough on thier plates🤣🤔
I have a bachelor's in accounting and find these videos very helpful. I don't work as an accountant any more but people keep asking me questions and these videos are great.
My goal is NOT to depend on Socia Security. You are a wealth of information. Thank you so much for taking the time to educate us. The awesome energy that flows in the Universe is yours. Where do you live? so you can be MY accountant. Given the responses you've been given to some of your subscribers, you better make mine a lot better :)))) Stay Healthy
this was really helpful. wished I knew about all of this before I formed an s-corp. would've set up an LLC instead and elected for s-corp tax treatment. the administration with an s-corp is annoying.
Thank you for this information. I stupidly got myself into a situation where I am a high income owner and went from W2 to C-corp. I am now playing catch-up with all this information
One of the MOST important points is SCorp properly done protects your personal assets from business litigation. You probably need more than that, but it's a start.
Kim. And that's a perfect surname as 'Kim' in Korean means 'gold'. And that's what each of these videos are: gold. These at least get people pointed in the right direction and that has value. Thanks upon thanks. If things go well, I'm sending you a donation gift.
Great Work! For the past few days in this quarantine I already watched all your videos and you are excellent human being by sharing your knowledge. Thanks!!!!!
Thanks for sharing this video! I'm a sole proprietor now for a part time business and I plan to expand to full time soon. Considering to convert to S-corp. I have a general understanding of the difference between the two. I'm just curious if being a self employed individual, particularly with an S-corp may have more difficulty getting a loan for a house compared to someone who's a W2. So for example, if I make $100k as a sole proprietor and then as an S-corp my paid income becomes $50k while the rest are distributions....wouldn't that make me look like I am not making very much to afford to buy a house? Anyone experiencing challenges getting loans to buy a home when they are an S-corp vs being a W2 or sole proprietor?
Hey Brian! First I need to thank you immensely for the advice and guidance you provide. My family and I have learned so much in the past few months and we are so glad we discovered you! You mentioned that distributions and reasonable salaries were addressed in another video but, I can't seem to find it. Would you consider producing a video or providing some guidelines/recommendations regarding these topics? Thank you so kindly!
Going back go one of your videos, If you make between $115,226 and $205,750 you are in the 33 % tax bracket, so in this sense is this where you already paid the SS taxes, and please keep on saying "SO" who gives a Sh.....t SO, as an S corporation, I will not contribute to Social Security, and I hope not to depend on the SS for retirement, what kind of retirement vehicle can I use to set me up when I retire? I think that an S corp is great when the company is really making lots of money. You are the man. !!!
Hi E Galindo, the first $137,700 of your income is subject to social security tax as an employee or a sole-proprietor. After that, you stop paying social security tax for the year. So sole proprietors suffer that tax on all their earnings up to $137,700, whereas an S-Corp will not be subject to that tax. That's one of the S-Corp benefits.
Do you have any examples of the Social Security benefit differences showing a benefit taxed as a sole proprietor versus an S Corp. when taking the 35 years into consideration? I would imagine if the tax savings are big enough those savings could be invested in order to return a higher rate to compensate for the reduction in Social Security benefits when Retirement comes.
one thing is if you have a w2 salary over the wage base you are already not paying SS or medicare and then going Scorp will actually cost you more as you will then have to pay SS for the employer portion...Most folks dont talk about this.
I learned so much from this video! I was on the fence about changing my business entity and this really helped. I can tell you know your S**T. This was not a sales pitch but packed with info. Thank you for sharing your knowledge.
I am confused about his comment that an S-Corp may have to pay local corporate taxes. I thought the whole point of an S-Corp was that the tax burden passes through to the individual filer, thus avoiding double taxation, i.e. both corporate and personal. Is this wrong?
First of all, thank you so much for such helpful videos and sharing your knowledge. If I own a S Corp and I'm the only employee, I pay my SS taxes through W2, and my S Corp matches another half, basically I'm still paying 15.3% as the same that sole proprietor would pay. So in this case, how S Corp would save SS taxes? Appreciate it!
Hi Krisit. Let's say you make $100,000 as a sole prop. The entire $100,000 would be subject to 15.3%. Let's say you're an S-Corp and you make $100K. You pay yourself a $40,000 salary and now, only the $40,000 is subject to 15.3% and the remaining $60,000 is not. In this scenario, you just saved $9,000+.
@@calebgonzales3836yes but it’s an above line deduction meaning it’s only deducted from your income, not your tax bill. So after doing the math on your tax rate, it’s a significant smaller effect
Thank you so much for another informative video. Love your bullet point approach to tackle the subject. Also thank you for the shout out in the other video. Question: Does New Jersey have the corporate tax at the state level like Illinois
Haha, happy to see you caught the shout out! Yes, NJ has a state level tax, however, it's based off gross sales: www.nj.gov/treasury/taxation/corp_over.shtml
six potential drawbacks of an S corporation: Reduced Social Security benefits upon retirement Additional cost of the tax return Potential state income taxes at the corporate level Payroll software costs State and federal unemployment taxes Cost of time spent on compliance
An S Corp was specifically valuable to me because all of the taxes I'll owe are paid each week up front and I never end up with a large tax debt due. Your thoughts on this?
I love that you said this. I'm so irresponsible I would rather have taxes taken out automatically.. Plus I'd be investing in stocks anyway so I would be okay with them reducing my social security tax. I'll be able to invest my own money
Brian, I can't stop watching your videos! Thank you so much for your information. For S-corp, say your corp profit is 100k, you are paying yourself 50k as salary through W-2. If you are the single person S-corp, are you paying total of 15.4% for FICA tax on that W-2? (6.2% as W-2 employee, and 6.2% as corporate employer) In that case, say my industry's acceptable median income is 100k and my corp profit is only 100k , then I would have to prioritize paying myself a reasonable salary first, right? Meaning I would have to funnel all 100k corp profit as my W-2 income? Since I will be paying 6.2% FICA as employer (S corp) and 6.2% FICA as W-2 employee, doesn't that defeat the purpose of S corp?
William, yes, you're paying the 15.3% FICA (7.65% employee + 7.65% employer) on the $50K salary. For reasonable salary, for the "industry" requirement, that's pretty relaxed. The distribution vs. salary percentage is more important. Thanks for your support William!
@@clearvaluetax9382 Thanks for your reply! I'm learning a ton. So it sounds like the name of the game is to optimize allocation between corporate profit, salary to yourself via W-2, and distribution to yourself as dividend. Corporate tax is flat 21%, so I guess it would depend on how much salary you are paying yourself (income tax + FICA tax liability) and how much dividend you are giving yourself which would bump up your income and be subject to income tax. In terms of ratio of salary:distribution, are you referring to 60:40 rule? Let's say my S-corp had 100k of profit and my profession's average salary on BLS website is 150k. Is giving myself 60k salary based on 60:40 rule still acceptable? You don't have to prioritize paying yourself reasonable salary before giving out distribution? You gotta get promoted more, you deserve way more subscribers!
William Kim A few notes, in your original comment you mentioned your business entity was an S Corp. Which is considered by tax law as a pass through entity. In other words S corps don’t pay any corporate tax, but instead all profits or losses are passed through to its shareholders. The only business entity that does pay corporate income tax is a C Corp. Now as for your other inquiries on FICA tax (Social Security and Medicare) you as the business owner/employee do pay the full 15.3% tax effectively. This is due to the fact the business pays half of the FICA tax on all employee compensation (7.65%) and the employee “pays” the other half (7.65%). Now the social security portion does have an applicable limit. Which in 2020 is 137,700. Anything over that is not subject to the social security portion of the tax. Sadly though the Medicare portion has no limit and any wages over 200,000 are subject to an additional 0.9% Medicare tax. Good news for the business though is the portion it payed is a tax deduction in your 1120S. Regarding your question about S Corp distributions, it’s a complicated matter as the IRS regulates this more heavily due to the fact it avoids FICA tax. The IRS is well aware of potential exploit by business and this is where you run into problems and potentially audits. Which is why you here many accountants or tax prepares say to pay yourself a reasonable wage as trying to exploit distributions just to avoid FICA taxes is a good way to get fined. You can take distributions as long as it’s reasonable in comparison to your wages paid.
Question. I had a business for 10 years as a sole prop and I payed taxes for my employees but I didn't give myself a paycheck like the rest of the staff. I had an average of 35 people working full time. Here's my question, if I didn't pay myself like the other employees does that mean nothing went into my social security? the reason I'm asking is because as the owner I was required to pay my part for every dollar I took from their check so does that help me at all or is everything for the employee
Hi Indira, the employer taxes did not help you. That was just the employer’s burden, it didn’t give any credit for your future social security payments. As a sole proprietor, you properly did not pay yourself a paycheck. Whether you paid-in to the social security system will depend on whether you showed profits on your taxes return and how much. If you showed a profit, you pay self-employment taxes (which is social security and medicare).
This was very eye opening, thank you very much! Would it be worth being an S-Corp if you gross below 150k and are 1-3 employees during your first year in operation?
I thought by switching to S corp I was saving most money because I was saving money on self employment tax? I guess this video came out after self employment tax was created. Were we not paying into social security before s corp?
Are you really paying less into social security by essentially paying what you would under any employer? When you get a job, you pay half of the FICA tax, your employer pays the other half. Do the employer payments count as part of your paid in pool also?
so if you make less than $100K net on Sch. C, and are older in your 50s or 60s but still replacing lower years, and you want to increase your SSI, you SHOULD NOT elect S-CORP right?
Awesome videos! I cant seem to find the one about 1 person s corp and how to take salary aka what my salary should be for max tax savings....also any videos in future on best way to/tips to have the PPP forgiven as a single s corp? Thank you!
I have heard that "reasonable salary" ranges from 40%-50% of net profits. The IRS does not specify what reasonable means, but in other cases, this rule of thumb does help. You can also check with a CPA, pay a small fee for their time to go over your earnings with you and they will be able to guide you on how much is reasonable to pay yourself so that you can maximize your savings.
Hi Tips 4 truckers, no, you are not required to re-invest the distribution to you back into your S-Corp. You can pocket some or all or reinvest it all back. I hope that helps!
@@clearvaluetax9382 but if you do "pocket some" won't that be considered a bonus (above & beyond the W2 wage) and thereby taxable @ higher rate? ..... I'm a trucker so this is extra important to clarify for me
Hi. I am in Florida. My LLC has income 160k per year. Due to high-income spouse, my tax margin is in 32%. Should I do S-corp for my LLC vs Sole proprietor?
Thank you sooo much for this information I really appreicate you taking the time out to help me understand so that I may know which direction to go into. do you have contact info if I have additional questions
I have a question: If I already filed taxes for the SCorp and for myself as an employee, can I take some of the money from my account? Will that be considered a paycheck towards myself and will have to pay taxes?
I currently have a partnership business. I’m thinking of changing to s-corp. I was wondering if in the future I want to file as a partnership status can I elect when I file as partnership or s-corp?
Hi Mz Leggs, it really boils down to your control of the worker. It's a multi-pointed test based on you setting the hours, supervision, whether they're using your equipment/gear, and other variables. So if you have more control in terms of the variables, then it leans more towards W-2 employee. If it's more of a "just get the job done" with little to no supervision, then it leans towards contractor. I hope that helps!
ClearValue Tax thanks so much for the speedy response....I was busy watching other helpful videos of yours and noticed the response.....very helpful...keep up the great work...
Hi, which entity provides a higher level of legal protection? I live in FL, and our company provides janitorial services as well as buy and resale of shoes. Thansk.
Great channel thankyou sir. I have a questions .I have small buissenes (nys) for seasonal ( 8months) im the one only worker. If have start S corp . can i qualified unemployment pay. Thank you.
Good video. Does paying the 15.3 percent FICA taxes as a sole proprietor entitle me to more social security benefits than if I had paid only 6.2 percent as a wage employee?
I would suggest that no, you would not receive more. It is just a choice. If you want to work for a company or yourself. Yourself being the employer having to cover the 6.2% and yourself the employee paying the other 6.2%. I would hope that i am wrong. But i have not found any information saying otherwise.
Great videos! Could you please advise what would be main differences between S-corporation and LLC taxable as S-corporation? Is it a difference only in terms of liabilities? Thank you.
@@clearvaluetax9382 If you have explained the difference between an S-Corp and an LLC taxed as an S-Corp, I can’t find it. It appears you got totally distracted with Stimulus checks and forgot you said you’d cover the differences. If you haven’t yet done so, please go into the exact differences between the S-Corp (a corporation) and an LLC (non-corporation) taxed as S-Corp, especially regarding restrictions on S-Corp with US Citizenship requirements and whether they can own other entities or be owned by other entities. Thanks
I hope you get this. But I really need help. When chosing an S corp and never using it. do you still have to file tax returns if there is no business going on.
Hi Damien, the S-Corp's tax rates depend on the owner's tax rates. So it could be as low as 10% or as high as 37%, it just depends on the individual (the owners).
@@metamaeta The income tax bracket. What would your income as a shareholder be? You can go on the IRS website to see income level tax brackets. That 37% is for individuals who make over 500,000 i believe. It can be 12%, 24%, ^^ and up depending on the income.
great video, i do have an s corporation, am looking to change to a sole proprietor, whould that be best to do at the end if the year, how would i go about it? thank you
Is it an LLC- S Corp or just an S CORP. What is your revenue looking like? Are you spending more then you would be saving on taxes of you switched to a Sole Prop. You must look at the numbers and weigh your options.
Probably around $40-50k. I've heard a range around there. Depends on your business but $20k and under, dont waste the money, just be a sole prop until you get your income up.
@@equalityprintondemand1024 your yearly take from the business. Reason being, you have to take a "reasonable salary" as W2 wages (so the government can hit you with self employment taxes) and so your overall income needs to have enough meat on the bone to both pay that salary and take a distribution. If you cant do both, dont bother with the extra fees you'll incur setting up an LLC and filing as an S-corp yet. That's not to say, "don't be an LLC," that really depends on your business and how likely you are to be sued due to your business activities. If you're an auto repair shop, probably start as an LLC lol take that from someone whose career was born of the automotive industry.
Does the S Corp need to be classified as soon as the LLC has been created or can it be done say the 2nd year when the business has started making a profit? Thank you.
Hi Misty, it does not need to be immediate. However, when a new year begins, you have until March 15th to make the election for that year (and it backdates to January 1st of the year).
Yes. S Corps are subject to the yearly $800 Franchise Tax. You can go the the Franchise Tax Boards website and you can read all info pertaining to S corps.
Hi Nam Yong, no, you do not need to pay taxes if your revenue is 0 as an S-Corp. However, you still need to file an S-Corp tax return (1120S). Failure to file an S-Corp (even if it has $0 in sales) will make you subject to penalty of about $200/mo per owner. I hope that helps!
@@clearvaluetax9382 thank you so much for tbe information! I also have another question for S-corp. As far as I have researched, I also need to report another tax forms beside 1120S. Is that correct? If so, what else types of forms do I need to report?
Thank you John for the feedback, I'll improve that for you. Seriously, I appreciate you calling that out. I used to say "okay" way too much in my earlier videos but fixed that. Looks like I gotta fix the "so". Thanks for the honest feedback!
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For more information, check out our helpful website: clearvaluefinance.com/
Fix your website, its not working.
I have mad respect that you are giving people your time and knowledge. It's a huge help. It's awesome that there's still some people out there that enjoy actually helping people. Great job never loose that spark.
THANK YOU JETHROW!! I appreciate that. That was so thoughtful of you to say!
I enjoy that he's giving people the (liabilities) for the topics most people who speak about with such joy and glee... They never talk about the "problems" with an s corp, they speak of it as a solution.
It sounds like it's only a solution for a biz that's going to have employees other than the owner. Becoming an employee yourself makes sense then.
As a single person enterprise folks have enough on thier plates🤣🤔
I have a bachelor's in accounting and find these videos very helpful. I don't work as an accountant any more but people keep asking me questions and these videos are great.
Thank you Bob for the feedback and I'm happy to hear that these videos help, I appreciate your support!
Thanks for this video. I’m trying to decide about an s-Corp
My goal is NOT to depend on Socia Security. You are a wealth of information. Thank you so much for taking the time to educate us.
The awesome energy that flows in the Universe is yours. Where do you live? so you can be MY accountant.
Given the responses you've been given to some of your subscribers, you better make mine a lot better :))))
Stay Healthy
this was really helpful. wished I knew about all of this before I formed an s-corp. would've set up an LLC instead and elected for s-corp tax treatment. the administration with an s-corp is annoying.
Thank you so much for sharing this
Watched 11/22/23
Thank you for this information. I stupidly got myself into a situation where I am a high income owner and went from W2 to C-corp. I am now playing catch-up with all this information
I could watch the same video 3 times and I always learn something new. Thank you very much.
W 7:42 wow. Everyone swears S-Corp is the magic bullet. Now we know the truth of how it affects social security
One of the MOST important points is SCorp properly done protects your personal assets from business litigation. You probably need more than that, but it's a start.
Kim. And that's a perfect surname as 'Kim' in Korean means 'gold'. And that's what each of these videos are: gold. These at least get people pointed in the right direction and that has value.
Thanks upon thanks. If things go well, I'm sending you a donation gift.
This is a really great channel and you're very good at presenting the information well. Thank you.
WOW. This is great information. I had no idea about this social security ceiling.
Great Work! For the past few days in this quarantine I already watched all your videos and you are excellent human being by sharing your knowledge. Thanks!!!!!
This video was very helpful. Thank you for taking the time to make it.
Thank you John for those VERY KIND WORDS! I appreciate it. Thank you for your support!
Thanks for sharing this video! I'm a sole proprietor now for a part time business and I plan to expand to full time soon. Considering to convert to S-corp. I have a general understanding of the difference between the two. I'm just curious if being a self employed individual, particularly with an S-corp may have more difficulty getting a loan for a house compared to someone who's a W2. So for example, if I make $100k as a sole proprietor and then as an S-corp my paid income becomes $50k while the rest are distributions....wouldn't that make me look like I am not making very much to afford to buy a house? Anyone experiencing challenges getting loans to buy a home when they are an S-corp vs being a W2 or sole proprietor?
Hey Brian! First I need to thank you immensely for the advice and guidance you provide. My family and I have learned so much in the past few months and we are so glad we discovered you!
You mentioned that distributions and reasonable salaries were addressed in another video but, I can't seem to find it. Would you consider producing a video or providing some guidelines/recommendations regarding these topics? Thank you so kindly!
I have Learned so much by watching your. Videos
Thanks for the feedback Honming, I appreciate it! That's very motivating for me to hear, I really, really appreciate comments like yours!
Going back go one of your videos, If you make between $115,226 and $205,750 you are in the 33 % tax bracket, so in this sense is this where you already paid the SS taxes, and please keep on saying "SO" who gives a Sh.....t
SO, as an S corporation, I will not contribute to Social Security, and I hope not to depend on the SS for retirement, what kind of retirement vehicle can I use to set me up when I retire? I think that an S corp is great when the company is really making lots of money. You are the man. !!!
Hi E Galindo, the first $137,700 of your income is subject to social security tax as an employee or a sole-proprietor. After that, you stop paying social security tax for the year. So sole proprietors suffer that tax on all their earnings up to $137,700, whereas an S-Corp will not be subject to that tax. That's one of the S-Corp benefits.
Do you have any examples of the Social Security benefit differences showing a benefit taxed as a sole proprietor versus an S Corp. when taking the 35 years into consideration? I would imagine if the tax savings are big enough those savings could be invested in order to return a higher rate to compensate for the reduction in Social Security benefits when Retirement comes.
Thanks. I did not know this.
one thing is if you have a w2 salary over the wage base you are already not paying SS or medicare and then going Scorp will actually cost you more as you will then have to pay SS for the employer portion...Most folks dont talk about this.
I learned so much from this video! I was on the fence about changing my business entity and this really helped. I can tell you know your S**T. This was not a sales pitch but packed with info. Thank you for sharing your knowledge.
There will be no such thing as social security benefits, in the future.
Fr
I am confused about his comment that an S-Corp may have to pay local corporate taxes. I thought the whole point of an S-Corp was that the tax burden passes through to the individual filer, thus avoiding double taxation, i.e. both corporate and personal. Is this wrong?
You are right
Thanks for this
Do you have a video on how & why or why not to convert a C corp to an LLC? Already have both set up. Only two members (husband & wife).
Thanks
First of all, thank you so much for such helpful videos and sharing your knowledge. If I own a S Corp and I'm the only employee, I pay my SS taxes through W2, and my S Corp matches another half, basically I'm still paying 15.3% as the same that sole proprietor would pay. So in this case, how S Corp would save SS taxes? Appreciate it!
Hi Krisit. Let's say you make $100,000 as a sole prop. The entire $100,000 would be subject to 15.3%. Let's say you're an S-Corp and you make $100K. You pay yourself a $40,000 salary and now, only the $40,000 is subject to 15.3% and the remaining $60,000 is not. In this scenario, you just saved $9,000+.
Got it. Thanks so much!!! I love your channel and will continue supporting you!!!
@@clearvaluetax9382 Isnt 7.65% of the self employement tax a deductible expense?
@@calebgonzales3836yes but it’s an above line deduction meaning it’s only deducted from your income, not your tax bill. So after doing the math on your tax rate, it’s a significant smaller effect
Thanks Man.
very good job explaining thank you
Thank you so much for another informative video. Love your bullet point approach to tackle the subject. Also thank you for the shout out in the other video. Question: Does New Jersey have the corporate tax at the state level like Illinois
Haha, happy to see you caught the shout out! Yes, NJ has a state level tax, however, it's based off gross sales: www.nj.gov/treasury/taxation/corp_over.shtml
six potential drawbacks of an S corporation:
Reduced Social Security benefits upon retirement
Additional cost of the tax return
Potential state income taxes at the corporate level
Payroll software costs
State and federal unemployment taxes
Cost of time spent on compliance
Thank You
An S Corp was specifically valuable to me because all of the taxes I'll owe are paid each week up front and I never end up with a large tax debt due.
Your thoughts on this?
I love that you said this. I'm so irresponsible I would rather have taxes taken out automatically.. Plus I'd be investing in stocks anyway so I would be okay with them reducing my social security tax. I'll be able to invest my own money
Thanks for the info!
Thank you for your videos.
Your amazing
Brian, I can't stop watching your videos! Thank you so much for your information.
For S-corp, say your corp profit is 100k, you are paying yourself 50k as salary through W-2. If you are the single person S-corp, are you paying total of 15.4% for FICA tax on that W-2? (6.2% as W-2 employee, and 6.2% as corporate employer)
In that case, say my industry's acceptable median income is 100k and my corp profit is only 100k , then I would have to prioritize paying myself a reasonable salary first, right? Meaning I would have to funnel all 100k corp profit as my W-2 income? Since I will be paying 6.2% FICA as employer (S corp) and 6.2% FICA as W-2 employee, doesn't that defeat the purpose of S corp?
William, yes, you're paying the 15.3% FICA (7.65% employee + 7.65% employer) on the $50K salary. For reasonable salary, for the "industry" requirement, that's pretty relaxed. The distribution vs. salary percentage is more important. Thanks for your support William!
@@clearvaluetax9382 Thanks for your reply! I'm learning a ton. So it sounds like the name of the game is to optimize allocation between corporate profit, salary to yourself via W-2, and distribution to yourself as dividend.
Corporate tax is flat 21%, so I guess it would depend on how much salary you are paying yourself (income tax + FICA tax liability) and how much dividend you are giving yourself which would bump up your income and be subject to income tax.
In terms of ratio of salary:distribution, are you referring to 60:40 rule? Let's say my S-corp had 100k of profit and my profession's average salary on BLS website is 150k. Is giving myself 60k salary based on 60:40 rule still acceptable? You don't have to prioritize paying yourself reasonable salary before giving out distribution?
You gotta get promoted more, you deserve way more subscribers!
William Kim A few notes, in your original comment you mentioned your business entity was an S Corp. Which is considered by tax law as a pass through entity. In other words S corps don’t pay any corporate tax, but instead all profits or losses are passed through to its shareholders. The only business entity that does pay corporate income tax is a C Corp.
Now as for your other inquiries on FICA tax (Social Security and Medicare) you as the business owner/employee do pay the full 15.3% tax effectively. This is due to the fact the business pays half of the FICA tax on all employee compensation (7.65%) and the employee “pays” the other half (7.65%). Now the social security portion does have an applicable limit. Which in 2020 is 137,700. Anything over that is not subject to the social security portion of the tax. Sadly though the Medicare portion has no limit and any wages over 200,000 are subject to an additional 0.9% Medicare tax. Good news for the business though is the portion it payed is a tax deduction in your 1120S.
Regarding your question about S Corp distributions, it’s a complicated matter as the IRS regulates this more heavily due to the fact it avoids FICA tax. The IRS is well aware of potential exploit by business and this is where you run into problems and potentially audits. Which is why you here many accountants or tax prepares say to pay yourself a reasonable wage as trying to exploit distributions just to avoid FICA taxes is a good way to get fined. You can take distributions as long as it’s reasonable in comparison to your wages paid.
Thank u !!
What about issues when applying for a mortgage
great job
Thank you Makenzi!
Question. I had a business for 10 years as a sole prop and I payed taxes for my employees but I didn't give myself a paycheck like the rest of the staff. I had an average of 35 people working full time. Here's my question, if I didn't pay myself like the other employees does that mean nothing went into my social security? the reason I'm asking is because as the owner I was required to pay my part for every dollar I took from their check so does that help me at all or is everything for the employee
Hi Indira, the employer taxes did not help you. That was just the employer’s burden, it didn’t give any credit for your future social security payments. As a sole proprietor, you properly did not pay yourself a paycheck. Whether you paid-in to the social security system will depend on whether you showed profits on your taxes return and how much. If you showed a profit, you pay self-employment taxes (which is social security and medicare).
@@clearvaluetax9382 nice i was worried i didn't pay into my SS for 10 years lol thank you o much for the clarification im happy now
Amazing INFO
This was very eye opening, thank you very much! Would it be worth being an S-Corp if you gross below 150k and are 1-3 employees during your first year in operation?
I hear 40k net or more it benefits the person to do s- corp
2022 !
Where are the other videos about S Corp stuff you keep referring to?
Too bad social security is BS and I have a killer stock portfolio
L O L... you just made my day R J.
lol... watching this video on 04.02.2020 and your comment is funny af.
I thought by switching to S corp I was saving most money because I was saving money on self employment tax? I guess this video came out after self employment tax was created.
Were we not paying into social security before s corp?
Cannot find your video on reasonable S-corp compensation / salary
If the savings are low would that imply that the income is low and if so wouldn't saving $2k be beneficial?
Are you really paying less into social security by essentially paying what you would under any employer? When you get a job, you pay half of the FICA tax, your employer pays the other half. Do the employer payments count as part of your paid in pool also?
so if you make less than $100K net on Sch. C,
and are older in your 50s or 60s but still replacing
lower years, and you want to increase your SSI,
you SHOULD NOT elect S-CORP right?
Awesome videos! I cant seem to find the one about 1 person s corp and how to take salary aka what my salary should be for max tax savings....also any videos in future on best way to/tips to have the PPP forgiven as a single s corp? Thank you!
I have heard that "reasonable salary" ranges from 40%-50% of net profits. The IRS does not specify what reasonable means, but in other cases, this rule of thumb does help. You can also check with a CPA, pay a small fee for their time to go over your earnings with you and they will be able to guide you on how much is reasonable to pay yourself so that you can maximize your savings.
Great video. Do I have to put my Distribution back into my company? Or can I pocket some of it?
Hi Tips 4 truckers, no, you are not required to re-invest the distribution to you back into your S-Corp. You can pocket some or all or reinvest it all back. I hope that helps!
Thanks
@@clearvaluetax9382 but if you do "pocket some" won't that be considered a bonus (above & beyond the W2 wage) and thereby taxable @ higher rate? ..... I'm a trucker so this is extra important to clarify for me
Hi. I am in Florida. My LLC has income 160k per year. Due to high-income spouse, my tax margin is in 32%. Should I do S-corp for my LLC vs Sole proprietor?
How do you predict your savings? Let's say the gross income is 100k?
How can I get help about tax on my case? I am debating sole proprietor vs S-Corp
Hi I couldn't find your video on income classification
Thank you sooo much for this information I really appreicate you taking the time out to help me understand so that I may know which direction to go into. do you have contact info if I have additional questions
I have a question: If I already filed taxes for the SCorp and for myself as an employee, can I take some of the money from my account? Will that be considered a paycheck towards myself and will have to pay taxes?
I currently have a partnership business. I’m thinking of changing to s-corp. I was wondering if in the future I want to file as a partnership status can I elect when I file as partnership or s-corp?
If you are an S Corp ...bail bonding company am I allowed to do 1099s instead of w2s
Hi Mz Leggs, it really boils down to your control of the worker. It's a multi-pointed test based on you setting the hours, supervision, whether they're using your equipment/gear, and other variables. So if you have more control in terms of the variables, then it leans more towards W-2 employee. If it's more of a "just get the job done" with little to no supervision, then it leans towards contractor. I hope that helps!
ClearValue Tax thanks so much for the speedy response....I was busy watching other helpful videos of yours and noticed the response.....very helpful...keep up the great work...
Best thing is an LLC that is taxed as an S Corp.
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Great content ! All signal..and Love the scorp pros and cons..
Ive heard a revenue threshold being 40k per year to be an S-Corp. would you agree?
...that's the net income threshold not revenue...
Hi, which entity provides a higher level of legal protection? I live in FL, and our company provides janitorial services as well as buy and resale of shoes. Thansk.
Great channel thankyou sir.
I have a questions .I have small buissenes (nys) for seasonal ( 8months) im the one only worker.
If have start S corp . can i qualified unemployment pay.
Thank you.
Good video. Does paying the 15.3 percent FICA taxes as a sole proprietor entitle me to more social security benefits than if I had paid only 6.2 percent as a wage employee?
Social Security taxes as a sole prop are 12.4%.
Essentially as a self employed individual you are paying both employer portion and employee portion 6.2% + 6.2% = 12.4%.
I would suggest that no, you would not receive more. It is just a choice. If you want to work for a company or yourself. Yourself being the employer having to cover the 6.2% and yourself the employee paying the other 6.2%. I would hope that i am wrong. But i have not found any information saying otherwise.
Great videos! Could you please advise what would be main differences between S-corporation and LLC taxable as S-corporation? Is it a difference only in terms of liabilities? Thank you.
Hi Tati, we have some videos about that but we're actually going to be making more S Corp vids. The tax savings is with the self-employment taxes.
@@clearvaluetax9382 Thank you! Looking forward to seeing more stuff about S-corps :)
@@clearvaluetax9382 If you have explained the difference between an S-Corp and an LLC taxed as an S-Corp, I can’t find it. It appears you got totally distracted with Stimulus checks and forgot you said you’d cover the differences. If you haven’t yet done so, please go into the exact differences between the S-Corp (a corporation) and an LLC (non-corporation) taxed as S-Corp, especially regarding restrictions on S-Corp with US Citizenship requirements and whether they can own other entities or be owned by other entities. Thanks
So that’s your highest adjusted gross income. Meaning they take the highest 35 years you have paid in?
I hope you get this. But I really need help. When chosing an S corp and never using it. do you still have to file tax returns if there is no business going on.
i just ran into that situation. My accountant said "yes". An IRS Form 1120 must be filed each year for the S Corp regardless.
YES, YOU MUST. Or you will incur penalties!
If a C-Corp is taxed at 21% and an S-Corp shareholder is taxed at 37%, why would I want to have an S-Corp? I don't get it
Hi Damien, the S-Corp's tax rates depend on the owner's tax rates. So it could be as low as 10% or as high as 37%, it just depends on the individual (the owners).
@@clearvaluetax9382 So how is that determined?
@@metamaeta The income tax bracket. What would your income as a shareholder be? You can go on the IRS website to see income level tax brackets. That 37% is for individuals who make over 500,000 i believe. It can be 12%, 24%, ^^ and up depending on the income.
can you do a yearly salary manually,
instead of a monthly payroll service?
No, you need to file quarterly payroll reports at the federal and state levels for every W-2 employee, which includes the owner as well.
great video, i do have an s corporation, am looking to change to a sole proprietor, whould that be best to do at the end if the year, how would i go about it? thank you
Is it an LLC- S Corp or just an S CORP. What is your revenue looking like? Are you spending more then you would be saving on taxes of you switched to a Sole Prop. You must look at the numbers and weigh your options.
So is it the highest of 35 years even if you worked more years or is it the last consecutive 35 years?
What would be a good income to know when to change to s-Corp?
Probably around $40-50k. I've heard a range around there. Depends on your business but $20k and under, dont waste the money, just be a sole prop until you get your income up.
@@CapitalWorksPro Are you talking yearly or monthly?
@@equalityprintondemand1024 your yearly take from the business. Reason being, you have to take a "reasonable salary" as W2 wages (so the government can hit you with self employment taxes) and so your overall income needs to have enough meat on the bone to both pay that salary and take a distribution. If you cant do both, dont bother with the extra fees you'll incur setting up an LLC and filing as an S-corp yet.
That's not to say, "don't be an LLC," that really depends on your business and how likely you are to be sued due to your business activities. If you're an auto repair shop, probably start as an LLC lol take that from someone whose career was born of the automotive industry.
Does the S Corp need to be classified as soon as the LLC has been created or can it be done say the 2nd year when the business has started making a profit? Thank you.
Hi Misty, it does not need to be immediate. However, when a new year begins, you have until March 15th to make the election for that year (and it backdates to January 1st of the year).
@@clearvaluetax9382 thanks for the info. I will continue to listen to your videos, as they are informative and great to learn from. - best.
@@mistylavina Thank you so much for your support Misty, you are awesome!
Q: if I form my llc to a s corp, do I still need to pay the Franchise tax every year. from California thank you.
Yes. S Corps are subject to the yearly $800 Franchise Tax. You can go the the Franchise Tax Boards website and you can read all info pertaining to S corps.
Can you file $0 payroll until your s corp has enough money to pay you money
You still need to pay taxes even if revenue is 0 as a S-corp?
Hi Nam Yong, no, you do not need to pay taxes if your revenue is 0 as an S-Corp. However, you still need to file an S-Corp tax return (1120S). Failure to file an S-Corp (even if it has $0 in sales) will make you subject to penalty of about $200/mo per owner. I hope that helps!
@@clearvaluetax9382 thank you so much for tbe information! I also have another question for S-corp. As far as I have researched, I also need to report another tax forms beside 1120S. Is that correct? If so, what else types of forms do I need to report?
Regretting becoming a S Corp lol
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We enjoy your videos, however you start ever paragraph with the word "SO" (most annoying!!!!!!!!!!!!)
Thank you John for the feedback, I'll improve that for you. Seriously, I appreciate you calling that out. I used to say "okay" way too much in my earlier videos but fixed that. Looks like I gotta fix the "so". Thanks for the honest feedback!
Awesome Video, i just want to make sure so if you pay yourself over $140000 in salary a year, S crop is not useful at all right? Many thanks
The additional medicare tax has no limit on salary just the social security tax
Thank you