1️⃣Your business doesn't make enough profit for the S corporation to save you money.
2️⃣You earn a high salary as an employee and business owner, exceeding the Social Security wage base.
3️⃣Your state or city imposes a tax on S corporations that negates federal tax savings.
4️⃣Your business income is passive, such as rental income.
5️⃣You're not planning to invest your tax savings into a retirement plan.
How do I determine if my business is making enough profit for an S corporation?
—You should do the math to ensure that you are saving more in taxes than the costs associated with an S corporation, such as tax return preparation and payroll fees.
What should I do if I earn a high salary as an employee and business owner?
—In this scenario, the S corporation tax strategy may not be beneficial for you, as you're already paying the maximum Social Security taxes. Consult with a CPA to find the best tax structure for your situation.
Which states impose additional taxes on S corporations?
—States like New York City, Tennessee, Illinois, and New Hampshire have additional taxes that can eat up the tax savings of an S corporation. Consult with a local CPA to understand the specific tax laws in your area.
Can I put my rental property in an S corporation?
—It's generally not recommended to put rental properties in an S corporation, as it can lead to tax consequences when trying to remove the property in the future. Consult with a CPA for personalized advice.
Should I invest my tax savings into a retirement plan?
—It's highly recommended to save for retirement by investing your tax savings into retirement plans like IRAs or solo 401(k)s. This ensures a secure future and can help maximize Social Security benefits.
00:00Introduction to the five scenarios where an S corporation may not be beneficial for your business.
09:14Explanation of the first scenario: when your business doesn't make enough profit for the S corporation to save you money.
13:18Explanation of the second scenario: when you earn a high salary as an employee, exceeding the Social Security wage base.
19:37Explanation of the third scenario: when your state or city imposes a tax on S corporations, offsetting the federal tax savings.
24:11Explanation of the fourth scenario: when your business income is passive, such as rental income.
29:00Explanation of the fifth scenario: when you're not planning to invest your tax savings into a retirement plan, which may lead to lower Social Security benefits.
37:58Closing remarks and invitation to enroll in the comprehensive course for more tax-saving strategies.
