Why Paying Yourself a Reasonable Salary is Critical for S Corp Owners
Apr 19, 2023As an S Corp owner, paying yourself a reasonable salary is a crucial strategy to maximize your income while minimizing your taxes. The advantage of an S Corp is that you can pay yourself a reasonable salary without overpaying. If you haven't been doing this until now, it's not too late to start.
Another of the benefits of being an S Corp owner is that you're less likely to be audited than a C Corp owner. However, this doesn't mean you can ignore the rules or be dishonest. As an S Corp owner, honesty, transparency, and humility are essential to your success.
S Corps are a great strategy for many small business owners to maximize their income. If you have more questions or want to learn more about S Corps, check out my S Corp series, linked below. And don't hesitate to reach out to me if you need more personalized guidance.
In this episode, you will be able to:
1. Discover the significance of assigning a reasonable salary to S Corp owners for tax savings purposes.
2. Learn how evading payroll and self-employment taxes may result in IRS complications.
3. Understand why honesty is essential when amending S Corp salary filings.
4. Recognize when it's time to change accountants if they're unaware of S Corp payroll requirements.
What you'll hear in this episode:
[2:00] Paying yourself a reasonable salary as an S Corp owner.
[4:30] If you don’t have a reasonable salary, it’s not too late to pay it.
[6:50] A “roundabout shortcut” some tax pros use to back pay salaries for the previous year.
[7:15] If you are an S Corp owner, the likelihood of you getting audited is astronomically lower than that of a C Corp owner.
[9:50] Take your chances on putting a $0 for S Corp salary in your first year if you made the mistake of not paying yourself a salary. Be honest with the IRS and be humble.
[12:00] An analogy to compare the difference between a helpful accountant and a puppy.
[14:00] Sometimes the stress of having to hide something is more painful than the stress related to the thing itself.
Related episodes:
Does an S Corp Make Sense for Me?
How Much Should I Pay Myself as an S Corp Owner?
How Do I Use the S Corp Strategy?
Resources:
Connect with Shannon:
Attend The CFO Accelerator Live: https://www.thecfoaccelerator.com/shannon
Find everything you need at www.keepwhatyouearn.com! https://www.keepwhatyouearn.com/
Questions about this episode? Text me!: https://my.community.com/shannonweinsteincpa
Chat about this episode in the Keep What You Earn Community – http://keepwhatyouearn.circle.so
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See how much you can save with an S Corp: https://www.keepwhatyouearn.com/keep-what-you-earn-s-corp-calculator
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The information contained in this podcast is intended for educational purposes only and is not individual tax advice. Please consult a qualified professional before implementing anything you learn.
