Best Tax Preparation Services in Palm Harbor, FL

What is an S-corp, and should you elect to treat your HVAC or plumbing business this way for tax purposes? 🤔 If you own a business, you have probably heard the term “S Corp,” or may have been told this is a good idea for your business. What does this term mean, and does it make sense for your business? Per the IRS website, S corporations are corporations that elect to pass corporate income, losses, deductions, and credit through to their shareholders for federal tax purposes. This allows the shareholders to avoid double taxation (a “C corp” would need to be taxed at the corporate level, and then again on your personal income). The main tax savings provided for an S corp, are on the “employment taxes,” or Social Security and Medicare taxes. How does this work? The business owner, or officer of the corporation, is treated as an employee. As stated by the IRS, the corporate officer must receive wages to the extent of reasonable compensation for services rendered to the corporation. As an employee of the corporation, the officer would receive a regular paycheck, with the employment taxes paid (a total of 15.3% between the business and employee side). On any additional profits taken out of the corporation, the shareholder would be able to take distributions, and while still paying income tax on these distributions, would not have to pay the above employment taxes of 15.3%. Sounds good, right? Unfortunately, oftentimes when this strategy is shared, not...