S corporations can save their owners a significant amount of tax.  This tax savings can exceed their entire annual CPA fee.  The IRS is naturally monitoring for abuses in this area as the potential dollar savings are substantial.  An ideal CPA to advise in this area is a financial expert that works primarily with real estate agents and other professionals utilizing S corporations, so they have industry data and up to date knowledge of the acceptable standards.

To reduce your self-employment tax bill, you can create an S corporation and hire yourself as an employee.  You pay yourself, who is classified as an employee, a reasonable wage for your work. If there is profit left over at the end of the year, the partner which would also be yourself split the earnings. Self-employment tax is only paid on wages — not on the company profit which results in significant tax savings.

Tax planning and industry financial expertise is critical in this area. Setting your salary too low exposes you to risk of IRS examination, which can result in payment of unpaid employment taxes and hefty penalties and interest.  Setting your salary too high leads overpaying taxes.  Over the course of your business’ life, the over-payments of tax and lost investment opportunities can cost you hundreds of thousands of dollars.

Monthly clients at Camuso CPA receive an annual in depth analysis of reasonable compensation.  Our team of CPA’s is constantly gathering support from every level of legislative and administrative tax authority. This is essential and should be offered by the CPA advising you. While there are other options, S-Corporation tax structure is an advanced tax planning strategy available to real estate agents and other self-employed professionals that can financially benefit. Ask your experienced CPA and business adviser about this strategy. If you need S corporation tax services in Charleston, we can help you with structuring yours.