Which Form 1120 C Deductions 2023-2024

Tax care is not just a name, it's a promise. With a sole proprietorship business, you have to pay all the taxes on an individual level, including Social Security and Medicare taxes. However, by having a corporation, you can save on Social Security and Medicare taxes. It limits the amount you have to pay into these taxes. Let's say you have a net income of $100,000 as a sole proprietorship on Schedule C. You would have to pay regular income tax on this amount, plus self-employment tax based on your operating profit. The self-employment tax is 15.3% after deducting your regular income tax rate. This would amount to $15,300 on $100,000. The main advantage of setting up an S corporation is that it reduces the amount you have to pay in self-employment taxes. Now, let's discuss how a W-2 works. As an employee, you pay into five taxes, including Medicare and Social Security taxes. However, what you may not realize is that your employer also pays into these same taxes in California. Out of these five taxes, two of them are included in the self-employment tax. Now, if you take these two taxes and multiply them by two, you get the self-employment tax rate of 15.3%. This is what you pay when you don't have an employer and work as a sole proprietorship. The IRS wants you to contribute to the Social Security and Medicare tax system, and as a sole proprietorship or LLC, you are subject to self-employment tax. Now, let's consider the comparison between an LLC and an S corporation. Both of these entities are subject to self-employment tax on all profits they make. However, with an S corporation, you receive a K-1, which is the only incoming report on your individual tax return. A K-1 is used...