According to your post, I can see you have done thorough research into the topic. also, you have mentioned that you are on payroll and are filing the quarterly tax returns. Additionally, you mentioned you have a single member LLC.
Let's say you do not file Form 2553 for S corporation tax treatment of your LLC, in that situation you will need to retrace your steps for payroll and amend the quarterly returns to show $0 payroll for you, the reason being that a single member LLC without any elections is a sole proprietorship and a sole proprietor cannot withdraw wages.
Let's say you file the late election on Form 2553 to treat your LLC as S corp for tax purposes, in that sitaution you are doing the right thing by taking reasonable compensation as wages from the business and then file S corporation return for 2024.
Now let's see how much may be your potential tax savings based on the information you have provided.
I will assume that you are filing as single and the business income is the only income on your tax return.
Also, I will assume that your gross revenue is $200,000 and the business expenses are $75,000 which give a net income of $125,000 from the business.
Potential tax as a sole proprietor:
You will fall in the 22% tax bracket range which will imply income tax of approximately $14,500
and self employment tax approxiamtely $15,000
So the total tax in that situation is $29,500
Potential tax if the LLC is treated as S corporation for tax purposes:
Assumption - Annual wages of $60,000
That reduces your net income from business to $65,000
Total of employee and employer FICA taxes on your wages - $7,500
With the assumptions made so far, you will fall in 12% tax bracket range with income tax approximately $5,500
Total tax in this sitaution is $13,000
As you can see there is a difference in the potential tax in the two tax treatments of the LLC.
As you rightly mentioned, the S corporation return will be an expense for the business and there will also be unemployment tax for federal and state which you must already be paying as part of payroll tyaxes.
With the limited knowledge of your complete tax sitaution, I have made some assumptions to provide you with the approximate tax amounts.
According to the above analysis, you will save in taxes as an S corporation.
