I'm currently a sole proprietor for a consulting business (I am the sole owner with no employees). I'm wanting to compare the difference in taxes between being a sole proprietor and being an S-Corp. I understand for a simple business like mine, being a sole proprietor is often the most tax efficient and simplest route.
For sake of this discussion, here are some fictitious numbers:
SOLE PROPRIETOR
Net profit (gross receipts minus expenses): $325,000
Self-employment tax: ($325,000*0.9235)*0.153=$45,921
Solo 401k Max: (($325,000-(0.5*$45,921))*0.2=$60,407 (less than $66,000 IRS max)
Employee deferred: $22,500
Employer contribution: $60,407-$22,500=$37,907
QBI Deduction: ($325,000-$45,921)*0.2=$55,816
S-CORP
Net profit (gross receipts minus expenses): $325,000
Salary/wages: $130,000
Employer FICA contribution: $130,000*0.0765=$9,945
Employee deferred: $22,500
Employer contribution: $130,000*0.2=$26,000
S-Corp distribution: $325,000-$130,000-$9,945-$26,000=$159,055
QBI Deduction: ($159,055-$48,500)*0.2=$22,111
Do these calculations based on the assumptions made look accurate? I assume both wages and distribution as an S-Corp are taxed as ordinary income?
