@yn-mailbox wrote:
Is this legal? Any red flags? I am just trying to save on the Social Security tax: my W-2 salary from my S-corp will be less than what I am getting on 1099.
Thank you!
That is your red flag. If you formed an LLC and elected to be taxed as an S-corp (a critical fact you did not disclose up front) then you must pay yourself a fair market rate salary for the work you do. If your customer thinks your work is worth $10,000 per month, and you only pay yourself $5000 per month, that is your red flag. If you are audited, the IRS is going to want an explanation. (And I assume you don't have much in the way of expenses, because if you had $5000 of deductible expenses, so your net profit was $5000 per month, your SS and medicare tax would be the same either way.)
Don't monkey around. If you want your customer to hire your S-corp, give them the S-corp name and tax ID number. If your income is reported on a 1099, you can directly report it as revenue on your form 1120-S return, you do not have to "pass it through" a schedule C disregarded entity on your tax return first.
But don't play games.
And you may want professional tax assistance on this subject.
