Victor Roberts wrote:
- quote -

Correct of course, and probably reason that didn't occur to
me, is that in my case, (I operate as a sub S), I'm not
concerned about health insurance deductibility, since I'm
covered by wife's plan at work.

If I were to have to advise a client however, we would
want to contrast the tax savings from a reduced salary not
being subject to SE or FICA tax, versus any tax savings at
client's marginal federal and state rate. Could go either
way, depending....

ChEAr$,
Harlan Lunsford, EA n LA
Wed 9 Mar 2005

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Harlan Lunsford <hlunsford[at]bellsouth.net> wrote:
- quote -

Certainly.

- quote -

A C Corp provides certain medical reimbursement benefits
that would not be available to officers of an S Corp.

--
Vic Roberts
Replace xxx with vdr in e-mail address.

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Victor Roberts wrote:
- quote -

Ah yes, but you do it before the fact, right? that is,
before 12/31?

One step further though, why not use an S corporation and
not subject all earnings to FICA tax?

ChEAr$,
Harlan Lunsford, EA n LA
Mon 7 mar 2005

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"Thomas Healy" <tomhealycpa[at]earthlink.net> wrote:
- quote -

With a C Corp any withdrawals should have been in the form
of a salary with a W-2 issued. Otherwise it would have to
be taken as a 'loan' from the corp to the shareholder--or
paid as a dividend and subject to double taxation since
dividends are not deductible by a C-Corp.

An S-Corp is almost always the best way to go for a small
corporation.

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Tom,
Thanks for your reply and your guidance.
I'll be meeting with a CPA in about a week to get these
problems fixed as best as possible.

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Thomas Healy <tomhealycpa[at]earthlink.net> wrote:

- quote -

Can't he also be an employee of his own C Corp and get W-2
wages? That is how I pay myself from my one-employee,
one-stockholder C Corp. Of course, he didn't pay himself a
salary and apparently didn't file 941's or anything else.

--
Vic Roberts
Replace xxx with vdr in e-mail address.

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"Ralph" <daytonohio10[at]sbcglobal.net> wrote:

- quote -

You've created a bunch of problems for yourself. First, in
the absence of elections the corporation is a taxable C
corporation. That means that any payments from the
corporation to yourself are taxable dividends, and the
corporation needs to issue you a 1099-DIV. Second, the
corporation is liable for income taxes; if the income is
over $50,000, the tax rate gets pretty steep.

You may be able to get this straightened out, but you'll
need professional help to do it right. For example, there
are procedures for getting a late S election, which can save
double tax. The payroll issue is more complicated. Expect to
pay a premium for fixing things over having done things
right from the outset.

--
Tom Healy, CPA
Boulder, CO
Web: http://www.tomhealycpa.com

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I own an insurance agency. I was a sole proprietor with 3
employees. On Dec 19, 2003, I incorporated my business. (I
did not file any elections, such as a C Corp).

In all of 2004 I continued with 3 employees. My business was
profitable, and I was very busy. Maybe too busy. I really
did not do anything different in my accounting from year
2004 and 2005.

For example, I did not pay myself a salary. I dont know
what, if anything else, I should have done during the year,
as a incorporated business.

Going forward I know that I need to file tax returns for the
corporation. I know that I need to file a return in the
State where my business is located. That is not a problem.
I'll have professional help with my taxes. But now I am
preparing my taxes (once I am more prepared, I will go to a
CPA).

I realize that this is a stupid-sounding question...but in
2004 was I required to pay myself a salary, and generate
documentation to show that I paid myself?

For example, should I have written myself checks to document
that I was paying myself? If I should have created
documentation for paying myself a salary in 2004, should I
just do so now (dated March 1, 2005)?

But what, if any, problems have I created for myself?

Please let me know if you have questions.

Thank you very much in advance.

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