TAX BENEFITS: If I am self employed sole proprietor and the company makes 100,000 + 100,000 from my husbands salary versus paying myself 20,000 through a S-Corp ($20,000, i.e. 20% is my approx profit) . I'd like to lower my total taxes and lower my s

Forum|Forum|6 years ago
October 9, 2019
9 replies
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Hi Palms

Level 7

you have to pay yourself a reasonable salary if you work for your s corp.

Anonymous

halpalms is correct about a reasonable salary from the S Corp. however, it is not defined in the code but rather the results of court cases, IRS rulings etc. even more complicated is the fact that the various tax courts don't agree on what's reasonable.

the best advice I can give you is to sit down with a tax advisor or financial planner. they will gather a lot more info than what you have provided to provide you with the best advice

Critter

Level 15

Sadly if you are trying to qualify for Income Based Repayments on the school loans simply paying yourself $20K of the $100K the S-corp makes it will not work since the repayment is based on wages + the pass thru income from the K-1 issued by the S-corp. If you could do it this way the IRS and student loan entities would never get paid.

Preppy in PinkAuthor

Level 2

The company makes 100k. As sole proprietor I file jointly with my husband. We pay 11% in Tax a year after deductions.

My student loan payment is based on the company's revenue - deductions + my husbands salary - deductions.

$1200 per month or $14,400 a year. (Which is approx 90% of my income)

The Company makes 100k - 80,000 expenses = 20k

This means the maximum I can pay myself is approx $15,000 + taxes + withholding

As an employee with yearly income of $15,000 my student loan payment would be $210 per month or $2520 a year (Approx 20% of my income)

The Deductions are different.

I am trying to determine if switching to an S-Corp will decrease my deductions, which would increase the total tax I pay. I.E. would it exceed the $12,000 a year I'm trying to save in student loan payments.