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One Man S Corp Needs be Careful

Posted by Charles | November 18, 2007 .

As usual, I’ll drop in some help info for who ever is working to be an entrepreneur. Some of you might be independent consultant and might has business as S Corporation. Here is a year-end tax-planning tip for you IT consultants and web entrepreneurs operating as S corporations got from Stephen L. Nelson, who publishes the do-it-yourself S corporation web site, recently shared this scary snidbit concerning S corporation.

Nelson says that at a November 1 Internal Revenue Service symposium in Seattle for tax practitioners, Mark Pierce, the IRS’s national S corporation issue specialist and S Corporation technical advisor said he takes position that one-person S corporations need to take all of their profits as wages.

Nelson notes that this position, while un-official, probably reflects how the IRS views one-man S corporations on examination.

A quick primer on S Corporations in case you’re uninitiated. The business profit that a sole proprietorship or partnership makes (or that an LLC treated as a sole proprietorship or partnership makes) is taxed twice: one time via the income tax and another time via self-employment taxes. Someone who makes $100,000 a year, for example, often pays around the $13,000 in income taxes and around $13,000 in self-employment (payroll) taxes.

Just thought this info might help. One Man S Corp Needs be Careful

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