![]() ![]() The tax rate is 15.3% on up to $160,200 of net income (then an additional 2.9% on any net income over $200,000-250,000). FICA taxes pay for Medicare are Social Security. Question: Can you explain FICA taxes to me and why they are important when I’m thinking, should my business be an S corp?Īnswer: FICA stands for Federal Insurance Contributions Act. To find the right number that gives you the tax advantages of being an S corp – but also meets the IRS guidelines – the Russo CPA team can help, contact us. You’ll need to pay yourself a salary that’s more than $10,000. The average graphic designer makes about $53,000 in 2023, according to Glass Door. I’ll pay myself a $10,000 salary, then take the $60,000 as dividends. ![]() You form a single owner S corp and your net profits are $70,000 for the year. Question: I’ve heard that with an S corp business structure, you can pay yourself a small salary that’s taxable – then larger distributions that are free from FICA taxes of 15.3%.Īnswer: The IRS keeps watch on S corps, ensuring that they pay themselves a “reasonable salary.” Let’s say you are a graphic designer. Question: Should my business be an S corp to take advantage of the new 20% deduction from the Tax Cuts and Job Act?Īnswer: While an S corporation can take the 20% deduction on qualified business income (QBI for short), so can LLCs and sole proprietorships, and partnerships. This quick overview of choosing a business entity offers simple definitions. We’re clearing the 6 most common myths regarding million-dollar question: should my business be an S corp?įirst, take a moment to understand the types of possible entities for your business. But there are also pitfalls – if you don’t follow S corp requirements (take too large a distribution, and you could hear from the IRS). There are benefits to becoming an S corporation (taking a distribution of dividends exempt from self-employment tax). The answer to “should my business be an S corp”? It depends. One question that keeps coming up is: should my business be an S corp? We get this question from LLCs and sole proprietorships – even employees wondering if now’s the time to launch that startup. Russo, CPA has been getting questions about which business entity will allow them to best take advantage of the law. Will it help or hurt me? The team at Robert P. CPA Robert Russo Breaks Down the Question: Should My Business Be an S Corp? ![]()
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