not as much as some sites will have you believe. It's not as simple as taking the difference between your net income from business and taking salary as s-corp. My quick calculations on my scenario,LLC filing as S-corp, RI resident. My accountant likes to use the 50/50 rule in declaring salary.
Example: On $120k net income from business
SE tax on $120k(x.9235 x .153) = $16,955
minus 1/2 SE deduction $8,477@ 25% = $2,119
Total SE tax = $14,836
with taking $60k salary, $60k distributions(filing as s-corp)
SE tax = $9,180($60k x 15.3%)
- Payroll taxes(TDI, Unemployment Ins) @ .038 x $60k = $2,280
- Franchise tax - $500
- Yearly filing fee - $50
- Payroll service - $465
= $12,475
That's a $2,361 savings only . Plus I will have higher accountant fees the first year..Plus the added paperwork. Worth it? Sure, I would say any savings make it worth it..but make sure you are making a high enough net income from your business or you could possible be losing money.
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