If you are self-employed, Stop and listen. Because this information will save you thousands of dollars every year. In order to increase wealth, you have to increase your income or decrease your expenses. Your biggest expense is taxes. Here is a list of a few taxes you pay: Capital Gains, Income, Property, State and Local, Gas tax, Sales Tax, local administrative fees, Franchise tax. For most people. The biggest tax they pay is FICA or self-employment tax for those who employ themselves. For you hardworking owners. You pay higher Social Security and Medicare taxes than anyone else. But it doesn’t have to be this way. One way to strategically plan to lower your taxes is to organize your business as an S-corporation with the IRS Every worker has to pay Social Security and Medicare taxes to the government. It is the law. If you have employees, you know you pay part of their self-employment taxes. However, if you're self-employed, you have to pay both portions of this tax. The combined employee and employer portions of this tax normally amount to 15.3 percent. Wow, that is a lot. God only needs 10% to take care of you. If you own stocks you probably are familiar with dividends. Have you noticed you don’t pay social security and Medicare taxes on dividends? Kind of strange right? If you go to work and make money, you pay an extra tax on Medicare and Social Security. If you sit on your ass and make money, you don’t pay an extra tax. The reason. It is not a tax but a benefit. And if you believe that, I want to talk to you about purchasing whole life insurance. Instead of getting mad. Do what President Trump does and don’t pay a dollar more than you have to. S-Corp distributions If you organize your business as an S-corporation, you can classify some of your income as salary and some as a distribution, as a dividend. You'll still be liable for self-employment taxes on the salary portion of your income, but you'll just pay ordinary income tax on the distribution portion. For every 10,000 you are able to shift from salary to distribution, you save $1,530. What can you buy for $1,530? Risks of S-Corporations The IRS is not stupid. They will take a closer look at S-corporation returns since the potential for abuse is so large. You must pay a REASONABLE salary. It is not reasonable for a person making $200,000 a year to pay only $10,000 in salary. What constitutes "reasonable" can often be a gray area, you need to be honest with yourself and make the right call. Additional costs for S-Corporations I’m a Texas attorney and I’m giving advice based on Texas law. Now not all States are the same, in California, an S-corporation must pay tax of 1.5 percent on its income with a minimum annual amount of $800. This tax is not required for sole proprietors. So, please talk to a CPA in your state if you don’t live in Texas. If you live in California, I’m sorry. God made it the most beautiful place, people turned into a shit hole. Here is how you do it in 5 steps: Step One: If you are an independent contractor, you need to have you need to make sure that your commissions can be paid directly to an LLC. This is a difficult step for financial advisors and real estate agents. Your brokers will give you pushback. Step Two: You’ll need to form a business. Speak to an attorney. Like me. I’ll charge you money to form a business. If you are cheap, form it yourself don’t call me for advice. I already created this video for you. Step Three: You’ll need to designate with the IRS that you are an S- Corp. You do this by filing Form 2553. Step Four: You’ll need to step up payroll to do your quarterly filings. Use an online company like Gusto or Quickbooks. They do a great job making it super easy. They file everything for you. Step Five: Determine a salary that is reasonable. Look at your past income tax return and realize that part of what you make is salary. Another part is for being an owner....(read more)
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As a self-employed individual, you know how burdensome self-employment taxes can be. Self-employment taxes are typically the amount that you pay for Social Security and Medicare taxes when you are earning a living on your own. Fortunately, there is a way to reduce these taxes by incorporating your business. By incorporating your business as an S corporation, you can reduce your self-employment taxes and save yourself some money. An S corporation is a type of corporation that is taxed differently from a traditional C corporation. Instead of being taxed at the corporate level, an S corporation is taxed at the shareholder level. Here are steps on how to reduce self-employment taxes with an S corporation: 1. Incorporate your business as an S corporation The first step is to incorporate your business as an S corporation. To qualify, your business must meet certain requirements, including having fewer than 100 shareholders, having only one class of stock, and being a domestic corporation. You will also need to file Form 2553 with the IRS to elect S corporation status. 2. Pay yourself a reasonable salary As an S corporation owner, you can pay yourself a salary as an employee of the business. This salary is subject to payroll taxes, but it can be offset by any deductions that are available to employees, such as health insurance premiums and retirement plan contributions. You should aim to pay yourself a reasonable salary that is commensurate with your job duties and the level of experience and expertise required for your position. 3. Distribute profits as dividends In addition to your salary, you can also receive income from your S corporation in the form of dividend payments. Unlike salary, which is subject to payroll taxes, dividends are not subject to Social Security and Medicare taxes. By distributing profits as dividends, you can reduce your self-employment taxes and keep more of your earnings. 4. Keep meticulous records To ensure that you are in compliance with IRS regulations, it is important to keep meticulous records of your salary, dividends, and other business expenses. This will help you to accurately report your income and deductions, avoid any potential penalties or fines, and ensure that you are getting the most out of your S corporation structure. In conclusion, incorporating your business as an S corporation can be an effective way to reduce self-employment taxes and save money on your taxes. However, it is important to consult with a qualified tax professional to ensure that you are in compliance with all IRS regulations and to help you maximize your tax benefits. https://inflationprotection.org/reducing-self-employment-taxes-through-an-s-corporation/?feed_id=92121&_unique_id=644b29b490237 #Inflation #Retirement #GoldIRA #Wealth #Investing #Howtolowertaxes #llcvsscorp #SCorp #Salaryv.distribution #selfemploymenttax #selfemploymenttaxes #smallbusiness #smallbusinesscheck #smallbusinessideas #smallbusinesstaxes #taxdeductions #SEPIRA #Howtolowertaxes #llcvsscorp #SCorp #Salaryv.distribution #selfemploymenttax #selfemploymenttaxes #smallbusiness #smallbusinesscheck #smallbusinessideas #smallbusinesstaxes #taxdeductions
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