Setting Low S Corporation Salaries

Updated for 2018, our "Setting Low S Corporation Salaries" e-book monograph ($45) provides detailed, actionable information on the S corporation tax loophole, including how to balance the "old rules" for saving payroll taxes with the "new rules" related to the Sec. 199A "pass-thru entity" deduction.

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Specifically, the e-book provides expert insights regarding recent IRS action as well as average salary data by small business size and industry. Further, it delivers easy-to-understand tips useful for safely setting tax-saving salaries.

In short, this concise guide (roughly 40 pages in length) provides the information you need to save thousands of dollars a year with your S corporation--but in a way that minimizes both the chance that your S corporation tax return will be examined and the chance your S corporation salary will be rejected by the Internal Revenue Service.

For more information, you can scroll down and review the table of contents.

Table of Contents

  • Introduction
  • How Low S Corporation Salaries Save Payroll Taxes
  • When Low S Corporation Salaries Don't Save Money
    • Gotcha #1: Extra Fees and Out-of-pocket Expenses
    • Gotcha #2: State Income Taxes
    • Gotcha #3: Multiple Shareholder-employees
    • Summarizing what the "Gotchas" Mean in Practice
  • How S Corporations Commonly Set Salaries
    • Average S Corporation Salaries
    • S Corporation Salaries Across Different Size Businesses
    • S Corporation Salaries Across Different Industries
    • Treasury Inspector General Pronouncements
  • What the IRS and Courts Say On-the-record
  • What the Internal Revenue Service Says Off-the-record
    • One-Man S Corporation Salaries
    • The Surprising Impact of the American Jobs & Closing Tax Loopholes Act
    • When There Are Other Employees and Capital Investments
    • Unofficial Minimum Salaries and Safe Harbor Amounts
  • Sec. 199A Pass-thru Entity Deduction Complication
    • How Sec. 199A Deduction Works
    • How Wages Impact Sec. 199A Deduction
    • Who Doesn’t Need to Worry about Sec. 199A Deduction
    • Who Should Consider Bumping Wages for Sec. 199A Deduction
    • The Optimum W-2 Wages amount for Pass-thru Entity
  • Ten Tips For Setting S Corporation Salaries
  • What Knowledgeable Tax Practitioners Often Recommend
  • Applying the Rules in Practice
    • Example #1: The One-Person Service Business that Makes $80,000 Annually
    • Example #2: The High-priced Professional that Makes $500,000 Annually
    • Example #3: The Semi-inactive S Corporation Making $20,000 Annually
    • Example #4: The Traditional Small Business With Employees and/or Assets
  • Conclusion
  • Appendix A - Understanding H.R. 4213: American Jobs & Closing Tax Loopholes Act
  • Appendix B - Relevant Portions of H.R. 4213 (including Sec. 413)

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