Where Form 1120 C Pub 2023-2024

Well, hey everybody! Rob Satrom from FeedbackWrench.com here. We help small businesses go from good to great by providing consulting, financial coaching, SEO, and marketing. Today, we want to talk about the drawbacks of converting to an S Corp or doing an S election. We're going to shed light on the dark side of becoming an S Corp. As you may know, one of the best ways to reduce self-employment taxes is by making an S election and converting to an S Corp when your net profits exceed $30,000 to $40,000. This allows you to mitigate the Social Security and Medicare taxes that eat away at your profits, totaling 15.3% of your net income. When you become an S Corp, you only have to pay self-employment taxes on the salary or payroll portion of your net profits. The other portion, called the dividend or distribution, is not subject to self-employment tax. Of course, you need to ensure that your salary is reasonable according to IRS guidelines, taking into account factors such as net profit, industry trends, and historical data. It's recommended to consult with a professional for personalized advice. While becoming an S Corp has its tax advantages, there are also drawbacks. Today, we will discuss the three major drawbacks. First, formalities. In order to enjoy the tax savings, you'll need to navigate through tax and legal formalities. This includes managing the tension between a reasonable salary and the owner's distribution. Maintaining accurate bookkeeping and accounting throughout the year is crucial for making informed decisions. Second, you'll need a payroll system for your S Corp. This is because the government has spent the Social Security funds, and strict compliance is required for remitting Social Security and Medicare taxes. It's highly recommended to use a payroll system such as ATP, Intuit, or ZenPayroll to ensure...