<nearly_blind[at]yahoo.com> wrote:

- quote -

Yes, the employer share of payroll taxes is swallowed up by
the system regardless of whether the employee is otherwise
over the limit.

Steve

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

I'm currently am an employee of a C corporation (of which
I'm a minority, 20% shareholder). I also receive significant
business (sole-prop/non-incorp) income as a consultant. For
example purposes say I receive 100K of employee income and
100K Schedule C profits from each respectively. With this
setup I do not have to pay the employer part of the payroll
taxes on my self-employment income (and also the employee
part because it's over the 2005 90K limit).

Is it true that that if I had incorporated my consulting
business, and the 100K of profits were paid out as wages
instead, that I would have to pay an extra 7.65% or 7650 in
taxes (the employer part of the SS/MED) on my consulting
income?

If so, I realize that I can distribute some of the income as
profits instead, but if I'm a consultant that gets paid an
hourly-rate that is around 2 times the equivalent hourly
rate a person in the same profession would normally receive
in salary if he was a full time employee, how much could
reasonably (according to IRS) be distributed as profits.
For example, it seems ~50 % would be reasonable, but that
would still mean an extra $3825 in taxes over the sole-prop
case.

Thanks.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >