Need help coming up with a reasonable S corporation salary?
A Subchapter S corporation can save its owner or owners enormous amounts of tax by correctly setting reasonably low salaries for shareholder-employees. A reasonably low salary reduces payroll taxes. But unfortunately the process is tricky.
Set a shareholder-employee's salary too low and you run the risk of an IRS audit, assessments of back payroll taxes, and penalties and interest. That's bad. Really bad.
Set a shareholder-employee's salary too high, however, and the economics are even worse. With shareholder-employee salaries that are too high, an S corporation and shareholder-employee may needlessly overpay payroll taxes. And overpaying payroll taxes could easily be a million dollar mistake over the course of your business's life.
To help S corporations and their owners make smarter choices concerning S corporation shareholder-employee compensation, I've written an 18pp, easy-to-understand ebook, "Strategies for Setting Low Salaries for S Corporation Shareholder-employees."
Written in plain, everyday language, this document explains how to save (potentially) thousands of dollars a year with an S corporation--but in a way that minimizes both the chance that your S corporation return will be examined and the chance your S corporation salary will be rejected by the Internal Revenue Service.
"Strategies for Setting Low Salaries for S Corporations" -- Table of Contents
II. How Low S Corporation Salaries Save Payroll Taxes
III. When Low S Corporation Salaries Don't Save Money
A. Gotcha #1: Extra Fees and Out-of-pocket Expenses
B. Gotcha #2: State Income Taxes
C. Gotcha #3: Multiple Shareholder-employees
D. Summarizing what the Gotchas Mean in Practice
IV. How S Corporations Commonly Set Salaries
A. Average S Corporation Salaries
B. S Corporation Salaries Across Different Size Businesses
C. Treasury Inspector General Pronouncements
V. What the IRS and Courts Say On-the-record
VI. What the Internal Revenue Service Says Off-the-record
A. One-Man S Corporation Salaries
B. When There Are Other Employees and Capital Investments
C. Unofficial Minimum Salary Amounts
D. Salary-Distribution Breakdown Formulas
VII. What Knowledgeable Tax Practitioners Often Recommend
VIII. Five General Rules of Thumb for Setting S Corporation Salaries
IX. Applying the Rules in Practice
A. Example #1: The One-Person Service Business that Makes $80,000 Annually
B. Example #2: The High-priced Professional that Makes $500,000 Annually
C. Example #3: The Semi-inactive S Corporation Making $20,000 Annually
D. Example #4: The Traditional Small Business With Employees And/or Assets
No-risk Money Back Guarantee
I personally guarantee you'll get more information and more useful information about setting S corporation shareholder-employee compensation in this $49 document that you will receive in any one-hour meeting with a tax accountant or tax attorney where you go over the same tax planning issues. Accordingly, if for any reason you feel you don't get valuable, useful information in my"Strategies for Setting Low S Corporation Salaries for Shareholder-employees" ebook, contact me at steve dot nelson at stephenlnelson dot com and request a refund within 30 days. Your payment will be completely refunded.
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About the Author
The "Strategies for Setting Low S Corporation Salaries for Shareholder-employees" ebook was written by Seattle CPA Stephen L. Nelson. A CPA for twenty-five-plus years, Nelson holds an MBA in Finance from the University of Washington and an MS in Taxation from Golden Gate University. The author of numerous best-selling books about accounting and finance including Quicken for Dummies (which sold more than 1,000,000 copes) and QuickBooks for Dummies (which sold more than 500,000 copies), Nelson also taught llc and S corporation taxation in the graduate tax school at Golden Gate University.
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