On Mar 5, 6:49*am, "Daniel David Palmer" <ddpal...[at]chironet.comwrote:

- quote -

Only the first 102k of salary is subject to SS, so you wouldn't be
saving much in SS taxes by doing the 100/300 split. Be aware that
some politicians want to remove the income cap (so your entire salary
would be subject to SS taxes, but theoretically the rate would be
lower). However, he would save medicare taxes of 2.9%.

Just be sure that 100k is a fair market salary. Some states also levy
a tax on income that is passed to to shareholders.

Your brother may be able to put around 45k a year into a SEP IRA. 25%
of salary, up to a maximum of 45k, can be saved this way. But he may
have to offer the same benefit to all his employees, otherwise his
plan would be discriminatory -- just check the rules.

And at present, is he operating as a sole proprietor? That seems kind
of risky to me with a medical business.

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"Daniel David Palmer" <ddpalmer[at]chironet.com> wrote in message
news:QqmdnUdFTrITLVPanZ2dnUVZ_hOdnZ2d[at]comcast.com...
- quote -

The 100,000 salary may considered be too low. In any event the small savings
in medicare tax may not justify the additional accounting fees to file
corporate federal and state income tax returns. There may also be state
corporate income taxes that exceed any medicare tax savings.

Is it kosher, yes it is, and great for the accountant. It should however
not be the reason your brother incorporates.

- quote -

<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >

I need your opinions here. My brother is a dentist here in Philly. His
practice grosses about $1M per year (he has multiple dentists working for
him) and nets about $400,000. An aggressive accountant has suggested that he
incorporate and pay himself about a $100,000 wage, taking the other $300,000
as pass thru profit that is not subject to earned income or Social Security
taxes.

Is this kosher?

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<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >