Schedule K-1 from an S-Corp does not generate Self-Employment tax. If you are the owner of an S-Corp, you need to pay yourself wages from the corporation as compensation, and issue a W-2 for you as an individual. See this link to the IRS discussion of this issue, which comes up frequently:https://www.irs.gov/uac/wage-compensation-for-s-corporation-officers
The Internal Revenue Code establishes that any officer of a corporation, including S corporations, is an employee of the corporation for federal employment tax purposes.
This is different for partnerships, which do generate Self-Employment tax
Schedule K-1 from an S-Corp does not generate Self-Employment tax. If you are the owner of an S-Corp, you need to pay yourself wages from the corporation as compensation, and issue a W-2 for you as an individual. See this link to the IRS discussion of this issue, which comes up frequently:https://www.irs.gov/uac/wage-compensation-for-s-corporation-officers
The Internal Revenue Code establishes that any officer of a corporation, including S corporations, is an employee of the corporation for federal employment tax purposes.
This is different for partnerships, which do generate Self-Employment tax
Thanks. I was confusing my son's taxes with my daughter's taxes. You are right. So now I have another question. She pays herself wages and part on the k-1. She has no SE tax. He works as an independent contractor, and the company gets 1099s. He then gets compensation from the company. He does pay SE tax. What is the difference in the tax rate paid for a given amount of compensation?. Is one way better than another?
It's generally better to be paid as an employee, because if you are self-employed you are paying both the employee's and the employer's share of Social Security and Medicare taxes. But if you are the officer of an S-Corp, the corporation is paying the employer's portion, so it's all the same, since it's your company.