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Thanks for your post (https://www.whitecoatinvestor.com/llc-filing-taxes-as-an-s-corp) on why you decided to file as an S-corp in 2017. I am following in your footsteps and doing the same for 2019, but looking to get some advice on the logistics of payroll mostly.
I am looking for advice on several things. I am anticipating net revenue of around 150k for a health policy consulting business. I will pay myself a salary of $75k (median for an economist on BLS) while deferring 19k as an employee to a solo 401k. I am also planning to contribute on the employer side the max amount, given the salary of 75k, I believe it is 25%, so another 18,750 as profit sharing (and avoiding FICA). I would also like to purchase health/dental for myself, which I am estimating at another $5k for high deductible plans.
By my accounting, I will have the following tax liability on the employee side
W2 wages: 75,000
Pre-tax deferral: 19,000
FICA: 5,737.50
Federal (56,000 taxable @ 24%): 13,440
Total Tax: $19,177.50
And on the employer side.
Net Income: $150,000
Wages: 75,000
401k Profit Sharing: $18,750
Health Benefits: 5,000
Employer paid FICA: 5,737.50
Net distribution to shareholders: $45,512.50
When I add the marginal tax on the distribution, I get another 10,923 in tax (assuming 24% marginal rate).
Total Tax paid from 150,000 Net Income: 5,737.50 Employee FICA, 5,737.50 Employer FICA, 13,440 Federal Tax on wages, 10,923 Federal Tax on distributions= $35,838 or 23.89%
If I didn't elect to be treated as an s corp and earned all of this as an LLC partnership. I believe the taxes would be as follows:
150,000 Wages
Social Security (Max taxable 128,700): 15,958.80
Medicare: $4,350
Employee 401k contributions: 19,000
Profit Sharing 401k contributions: 37,000
Can't deduct Health Insurance because eligible through wife's work
Deductible half of self employed: 10,154.40
Federal Tax (Taxable Income= 83,854.6) @24% marginal= 20,122.94
Total Tax= FICA 20,208.8 + Federal Tax 20,122.94= 40,331.74
Tax Savings= 40,331.74 (LLC Partnership)- 35,838 (S Corp)= $4,493.74
However, I would like a really simple way to do payroll. I don't really want to have a payroll service to force myself to learn how this works. Any recommendations for payroll on your S-Corp? I am planning to pay myself 4 times a year for my salary and distributions as needed (elected to be s corp in 2019). It should be really simple, but I am going to also pay for dental/medical as an employer paid benefit and the profit sharing component of the solo 401k to avoid FICA on as much as I can. Any recommendations? I’d prefer to do it myself to learn, but not sure if I am over my head here. What records would I need in the event of an audit? Thanks for any advice.
I am looking for advice on several things. I am anticipating net revenue of around 150k for a health policy consulting business. I will pay myself a salary of $75k (median for an economist on BLS) while deferring 19k as an employee to a solo 401k. I am also planning to contribute on the employer side the max amount, given the salary of 75k, I believe it is 25%, so another 18,750 as profit sharing (and avoiding FICA). I would also like to purchase health/dental for myself, which I am estimating at another $5k for high deductible plans.
By my accounting, I will have the following tax liability on the employee side
W2 wages: 75,000
Pre-tax deferral: 19,000
FICA: 5,737.50
Federal (56,000 taxable @ 24%): 13,440
Total Tax: $19,177.50
And on the employer side.
Net Income: $150,000
Wages: 75,000
401k Profit Sharing: $18,750
Health Benefits: 5,000
Employer paid FICA: 5,737.50
Net distribution to shareholders: $45,512.50
When I add the marginal tax on the distribution, I get another 10,923 in tax (assuming 24% marginal rate).
Total Tax paid from 150,000 Net Income: 5,737.50 Employee FICA, 5,737.50 Employer FICA, 13,440 Federal Tax on wages, 10,923 Federal Tax on distributions= $35,838 or 23.89%
If I didn't elect to be treated as an s corp and earned all of this as an LLC partnership. I believe the taxes would be as follows:
150,000 Wages
Social Security (Max taxable 128,700): 15,958.80
Medicare: $4,350
Employee 401k contributions: 19,000
Profit Sharing 401k contributions: 37,000
Can't deduct Health Insurance because eligible through wife's work
Deductible half of self employed: 10,154.40
Federal Tax (Taxable Income= 83,854.6) @24% marginal= 20,122.94
Total Tax= FICA 20,208.8 + Federal Tax 20,122.94= 40,331.74
Tax Savings= 40,331.74 (LLC Partnership)- 35,838 (S Corp)= $4,493.74
However, I would like a really simple way to do payroll. I don't really want to have a payroll service to force myself to learn how this works. Any recommendations for payroll on your S-Corp? I am planning to pay myself 4 times a year for my salary and distributions as needed (elected to be s corp in 2019). It should be really simple, but I am going to also pay for dental/medical as an employer paid benefit and the profit sharing component of the solo 401k to avoid FICA on as much as I can. Any recommendations? I’d prefer to do it myself to learn, but not sure if I am over my head here. What records would I need in the event of an audit? Thanks for any advice.
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