Should Your Business Be Taxed as an S-Corporation with W-2 Income? Learn the Facts!

💼Tax savings from an S-Corporation may not outweigh the costs if you have high W-2 income and a small business.

💵The employer portion of the self-employment taxes is not refunded, resulting in additional costs.

💰S-Corporation may save more taxes if your W-2 income is lower or your business profit is higher.

📉Consider factors like tax prep fees and payroll costs when evaluating the financial viability of S-Corporation.

💡Consult with a CPA or tax professional to analyze your specific situation before deciding on S-Corporation taxation.

Is it beneficial to be taxed as an S-Corporation if I have a high-paying W-2 job?

—If your W-2 income is high, being taxed as an S-Corporation may not be financially beneficial due to the non-refundable employer portion of social security taxes.

Do I get any tax savings by choosing S-Corporation taxation?

—Tax savings from an S-Corporation depend on various factors, including your W-2 income and the profit of your business. It may save more taxes if your W-2 income is lower or your business profit is higher.

Are there any additional costs associated with S-Corporation taxation?

—Yes, there are additional costs associated with S-Corporation taxation, including tax preparation fees and payroll expenses. These costs should be considered when evaluating the financial viability of S-Corporation.

Should I consult a tax professional before choosing S-Corporation taxation?

—Yes, it is recommended to consult with a CPA or tax professional who can analyze your specific situation and provide personalized advice on the financial implications of S-Corporation taxation.

What are the potential implications of S-Corporation taxation for high-wage earners?

—For high-wage earners, choosing S-Corporation taxation may result in higher costs due to the non-refundable employer portion of social security taxes. It is important to carefully consider the financial implications and weigh them against potential tax savings.

00:00This video discusses the financial implications of being taxed as an S-Corporation while having a high-paying W-2 job and a small business.

12:55As an employee with a high salary, you have to pay social security and Medicare taxes.

57:30As a sole proprietor, you pay both the employer and employee portions of self-employment taxes.

01:45:12Being taxed as an S-Corporation may save more taxes if your W-2 income is lower or your business profit is higher.

01:55:52Consider additional costs such as tax preparation fees and payroll expenses when evaluating the financial viability of S-Corporation taxation.