McVay's June 2018 Newsletter
Mike McVay is an Accountant, Tax Advisor and Certified QuickBooks ProAdvisor in Pensacola, FL. McVay keeps his clients up to date with all the latest news with twice a month electronic newsletters and a mailed bi-annual newsletter. If your in need of QuickBooks set-up, clean-up, training or consulting, Mike McVay has been a Certified QuickBooks ProAdvisor for over 20-years. McVay's clients praise his attention to detail and get it done attitude at a reasonable rate.
See McVay's digital newsletter link below and the summer 2018
bi-annual printed newsletter.
Free Consultation offered during the summer of 2018.
850-725-5696 - Mike@MikeMcVay.com
5336 N Blue Angel Pkwy Pensacola, FL 32526
www.QuickBooksPensacola.com - www.PensacolaFLTax.com
There is a misconception floating around out there that an S-Corp is a standalone entity. Not true. There are three basic business entities with variations within. The three basic are-
Also note how an S corporation is not listed. It is not an entity. It is a taxation election. The underlying entity has to be one of the above, and usually it is an LLC (either single-member or multi-member) for the ease of formation.
So while we might talk about your ‘S Corp’, or ‘S Corp Taxes’, we are truly talking about your underlying entity being treated as an S-Corp for taxation. Again, this is a common misconception… no biggie if you thought otherwise.
Avoid Self-Employment TaxesA common complaint from those who own their own business is self-employment tax. Can you avoid, reduce, eliminate or lower your self employment taxes or SE taxes? Yes, to a large extent actually but it takes some effort and an S Corp Election.
If you own a business as a garden variety single-member LLC (one owner or shareholder), your business income will be reported on your personal tax return under Schedule C and is subject to self-employment tax (currently 15.3%) and ordinary income tax. The same is true for a business that has not formed a corporation such as a sole proprietor and partnerships. So, you could easily pay an average of 40% (15.3% in SE taxes + 25% in income taxes) on all your net business income in Federal taxes. Wow!
S Corp ElectionIf you own an LLC and have elected to be treated as an S corporation (Subchapter S) for taxation, the business now files a corporate tax return on Form 1120S. What’s the big deal? Before we get into that, let’s look at some quick numbers. These are based on using a salary of 40% of net business income for incomes up to $500,000 and then decreased incrementally to 30% for the millionaire at $2,500,000.
Mike McVay - Accountant
Mike McVay, Tax Accountant Blog
Certified QuickBooks ProAdvisor & Licensed Tax Accountant Pensacola, FL
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