If you’re the owner of an S corporation, you can save a lot of money on self-employment taxes. How? By paying yourself a low salary and taking the remaining profits as distributions which are not subject to the self-employment tax.
But as is often the case with the tax code, the devil is in the details. Which is why I urge you to read my must-read new article titled Tax Tips: How to Audit-Proof the Owner’s S Corporation Salary?
Three ways our fact-filled article can help you:
- We’ll explain “The Goldilocks Principle.” If you set your salary too low, an IRS audit will be a painful experience. Set your salary too high, and you could be cheating yourself out of savings on your self-employment taxes. Want to find out how to set your salary “just right”? Read the full article.
- You’ll learn that when it comes to S corporations, size really does matter. The single owner of a personal-service S corporation with no employees has no chance claiming a zero salary and all S corporation profits as corporate distributions. We’ll explain this in detail when you read the full article.
- You’ll learn how to determine and prove what is a “reasonable” salary. To help make things clear, we’ll examine the court case of CPA David Watson. You’ll learn plenty when you read the full article.