Here at Kohler Financial, we often get questions from clients about ways to save money. Therefore, we will take you through a great piece of information that is rarely known or used by tax preparers.
This weeks blog post will be about S Corp Election. This can be applied to any LLC so if you are in Nevada or even if you want to incorporate in Nevada, Kohler financial can help you with your bookkeeping needs.
S Corp Election
If you own an LLC making at least $60K in Net Profit annually, you can benefit from electing to have your LLC taxed as an S Corp under IRS guidelines. Your LLC will remain an LLC under legal and state guidelines, but you will gain the advantages of S Corp status when filing annual income taxes with the IRS.
Using $60K of Net Taxable Income as an example, the full $60K of LLC income will be subject to 15.3% Social Security & Medicare tax. Filing IRS Form 2553 allows your LLC to be taxed as an S Corp, which is not subject to pay SS & Medicare tax on profits, although you must take a reasonable salary. With Kohler Financial, we prefer to handle your bookkeeping too so that we can ensure your salary is handled correctly.
Suppose you begin taking a salary of $32K annually with your newly-classified S Corp. This would be an additional expense on your P&L that would lower Net Income to $28K. The $32K salary would be subject to SS & Medicare tax like usual, but the remaining $28K of Net Income would not be subject to SS & Medicare. In this example, the S Corp election has saved you over $4,000 annually.
If your LLC has $100K in annual profits and you elected to be taxed as an S Corp, the savings increase. You can take a reasonable salary of $55K and have $45K of annual profits no longer subject to 15.3% SS & Medicare tax. Your new S Corp status has now saved you $7,000 annually.
In addtion, there are payroll administrative costs to consider when you begin taking a formal salary. Fortunately for our clients, we have partnered with Las Vegas payroll companies that offer low-cost payroll solutions. Contact Kohler Financial today to learn how S Corp election may benefit your small business.
These are just a few of the tax laws that Kohler Financial keeps up on. The best thing we can do for our clients is to stay educated on the newest tax laws. Whether you are creating a new corporation in Nevada or you are a seasoned business that needs an accounting firm in Las Vegas. We are here to help you be as successful as you can be.
Any tax advice contained in the body of this message is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.