It will be New Year’s day before we know it. You might already be thinking about New Year’s Resolutions. If you’re a business owner this would be a great time to review your finances and tax situation. Most business owners I speak with want two things 1) make as much profit as possible and 2) pay as little in taxes as legally possible. One option you might consider is making a change to your entity selection.
Here at Abacus CPAs, LLC we have created this General Guide regarding if making an S-Corporation election might be a good fit for you:
- Are you current on filing all income taxes?
- Do you pay your estimated taxes on a timely basis?
- Do you pay your tax balance dues on a timely basis?
- Have you been self-employed for two or more years?
- Is your net profit from your business $100,000 or more?
If you were previously a Sole Proprietor and elect to be taxed as an S-Corporation here are some general changes to expect.
Tax Return Changes
You will now be required to file two tax returns. All income and expenses from the business are filed on Form 1120S. As a result of the 1120S return, a K-1 will report the individuals’ income that will need to be reported on the induvial income return.
The S-Corporation must pay the shareholder who performs services (such as driving the truck) a reasonable wage for the services provided to the business.
The shareholders’ net profits from the business are not subject to self- employment tax. But, a portion of the self-employment tax is paid on wages.
If you answered YES on all the general guidelines questions and understand the expected changes then we encourage you to contact an Abacus Professional today to discuss if electing to be taxed as an S-Corporation would benefit you.
At Abacus™ CPAs, our focus is you! Contact us today if you need help or more information on this valuable topic.
We believe that our employees and clients deserve to interact in an environment that fosters growth, trust, and confidence. Abacus™ professionals provide leadership by relentlessly pursuing the best guidance possible so those we serve can make smarter decisions.
We are here to serve you and your business. Contact us today by calling 417-380-5000, or visiting our website at www.abacustrucking.com