In this video I’m doing a walk through on an S-Corp to lower federal income taxes, increase QBI deduction and maximize your retirement savings. The split between your w-2 wages and distributions going beyond just payroll taxes and reducing your contributions to social security. The breakdown of your income also can affect your section 199A deduction and the amount you can contribute to your retirement plan.
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100k is probably not reasonable. You need to do a study and warn clients of possible problems. You have oversimplified.
does your distribution affect your total gross income when qualifying for tax credits or is it just the amount you make on the W2?
Thank you, very useful!
I am who you're talking about in this video. My bookkeeper told me yesterday that I'm going to owe $30K+ plus in taxes for the year of I don't do somethings before December 31st. We took my salary from $30k to $81k. Now I'm scrambling to figure out how to setup a SEP IRA or solo 401K. I'm considering whether to lease a car, which I wouldn't do otherwise. I also need to bring on another independent contractor to increase expenses, and buy computer equipment for my business that I've known all year I need to buy. What else can I do??? How much can I give to my church? What else??
Thanks for the video. I was SMLLC (sole proprietor) in 2021 (the year I was let go from my employer and decided to start my own business). I have been operating in 2022 under this current structure but I want to convert to an S-Corporation. I know Form 2553 needs to be completed. My question is when the S-Corp election would be deemed to start and is this date the date when I would be able to start paying myself a salary?
Thank you so much. 2021 is my first year with s-corp. I didn't have payroll service. Can i still deduct wages from my 1120-s???? thanks
Hi Travis, good video. Just want to confirm something. For the $50K W-2 case, you said "short by $500 in order maximize…". This seems wrong. Deferral $19.5 + catch-up $6.5 + after-tax $25 would make the gross wages $1000 short. Further, there is also a 1/2 of FICA taken out of the paycheck as well. So it seems that the gross wage is short by $1000 + 15.3%/2*50000 = $4825. Is this correct? Thanks.
I’m getting from this that the higher the w2 the more you save and more you put away for retirement? Is that correct?
If you are a single tax payer in this example, wouldn't you have an issue of your QBI deduction getting phased out? What would you do in this situation?
Nice video Travis. I did not understand where are the after-tax contributions coming from? From W2 or from distributions? In the first scenario with $50k W2, can I do a pretax employee contribution of $19.5k and then an aftertax contribution of $38k?
How are you calculating the federal tax amounts in both scenarios?
This is super useful. I've seen a bunch of articles / videos on this, but actually walking through an example really made it click.
I'm trying to wrap my head around why Federal income tax is more on the 100k side ($43,138), than the 50k side ($41,473). What is that number based on?
This is great – thank you!
Isn’t there a 20% tax break on the distribution for S corp?
Thank you, appreciate you taking the time to walk through this complicated – many -moving part – calculation. My brain hurts!
Hi