No one ever mentions the tax responsibility from the S Corp by issuing a W2. The corporation must also pay its fair share of payroll taxes to the IRS and local tax authority, in addition to the taxes paid by the W2 recipient. Most people just think, oh, I'll just issue a W2 to my 'employee' and that's that. Nope, not that cut and dry. The corporation must also pay all the federal and state taxes, which is equal to the same amount the employee deductions to those same entities. So please make sure you have enough capital to account for payroll... Which in addition includes state and federal workers comp, unemployment, and even local municipality taxes like we pay here in NYC.
Consider that by 'paying' a business owner's taxes that means the tax you think are "paid" are actually withholding taxes. If an employee is paid then the tax is withheld from that person's earnings so yes - the business has to then give it (or as you call it "pay" it) to the gov. If withheld from the owner, that is tax paid-in on his 1040. But if you're in NYC it's even more ridiculous I'm sure! My explanation is monies paid by your business on behalf of your employee (withholding). It's not a tax the business is paying. I hope that made sense!
2023 been a challenging year, but I managed to make $250,000 before taxes as the sole breadwinner and head of household. It's a good starting point, but I'm always looking ahead on how to improve.
You might want to consider starting with a different approach, like the snowball method. Focus on one loan, usually the smallest one, and direct all your resources to pay it off while maintaining payments on the others.
Another option is to work with a money coach or investment advisor. While an investment adviser focuses on the long term, a money coach can help pay off all your debts, maximize cash flow, and create systems for proactive money management.
A financial adviser could also provide a holistic plan for your money, addressing both short and long-term goals. I've been consulting with Monica Mary Strigle from WA, and it's been transformative. Making $662k in the past 8 months from barely $400k gives me high hopes for 2023.
That's impressive! Who is Monica Mary Strigle, and how can I reach her? I've tried finding a good adviser around me, but it seems impossible without exorbitant fees. Can you share her fee structure as well?
Monica Mary Strigle is highly ranked and renowned among investors in WA. I was referred by a friend at the Washington Post. You can find her online, and her fee structure is reasonable considering the invaluable guidance she provides.
Love your pitch mark. I am struggling through my sole proprietor taxes from 2022. I'm a MD and being a sole prop is killing me. I will def get set up with y'all. I'm in WI. It took the pandemic for me to realize I already spend 3k-5k a year on malpractice. I don't HAVE to just contract for a place. Sorting through the cashapp payors, all my 3rd party pay is out of wack. I think I only started to move beyond my rent and have 1k a month, was due to spending money to make money. My addiction patients get better, but then they don't need me anymore (BC I ROCK) and don't rip patients off. Looking forward to some aggressive tax pro to help me! Will call. The taxes must be done by Oct 31.
Oh HALLELUIAH! Someone who finally outlined why I should go S-Corp instead of LLC. I'm running up against those pesky self-employment taxes, and want an entity that I can use for investments, etc. Thank you!
It would be a good idea to do a video explaining what to do when the SCorp has losses. (I haven't listened to it yet.) A video on calculating Basis would get watched a lot too!
Hey, thank you for the video. Very well put together. I'm just wondering around the 16:00 mark, when you were talking about filing s Corp and the more you make the less you pay on taxes as pay roll decreases, what is that other money classified as? The money that isn't payroll. And theres.. just.. no self employment tax on that portion? Interesting! Thanks for the video again. I need to look into your tax advisor network you mentioned. I'm just starting off
Don’t know if you ever got the answer, but for S-corp, after you take into account all the expenses (which the payroll taxes are part off) … the Net Profit or Loss flows through from the S-Corp to you the individual(s) to your personal return as distribution and usually taxed at the individual income tax rate.
I feel like such a scholar to have traveled the financial business channels comments to discover this gem! The official connect of these two amazing channels. What a treasure 😀
Hey do you have a team or connections in Philadelphia Pennsylvania specifically? Philly has a draconian and unforgiving tax system, so it must be a CPA in the city, not near, because you have to be a damn near expert to deal with the municipal system of Philadelphia. I imagine there are similar nightmares for small business in NYC, Chicago, LA, Phoenix, Miami.....you get the point.
My business is an LLC taxed as an S-Corp. It saved me tons in taxes last year. But you say you must pay state taxes where you sit your butt in your seat. What if you are a military spouse and your home of record legally is elsewhere other than where you sit making your money. Per the Military Spouse Residency Relief Act, I should be able to maintain legal residence in the state where we used to live. My online business still operates out of that state. My EPA says this is okay per the Servicemember's Civile Relief Act. He says once we change our domicile with the military we will need to do the business state switch at that time. But now I worry after watching this video. This is all very hard to navigate when you move ever 2 years and have a successful business that you operate out of the home.
You should be fine. I'm in the military and my wife works in one state but get tax states from my home of record but I'm exempt from state taxes, so she pays no state on her employment and if she does we get it all back when we file taxes.
Mark, I love the video. I do have one question though, I own a Wyoming LLC for my real estate because it can be anonymous when people look up the property. I believe Delaware is the same way, when you say different state LLCs don’t matter do you mean from a state tax perspective or just in general? Because there may be some qualitative reasons to be in some of these states from what I’ve learned. Let me know your thoughts if you see this, thank you!
All your info is SO great, Mr. Kohler. Thank you for everything you do here. I'm a single-owner Sub Chapter S Corp. I *think* I must take all of 2023's K-1 income, but I won't know what that is until into 2024 when all accounts are settled and my Accountant finishes December. But I heard that I must withdraw all my 2023 K-1 earnings in 2023. How is that possible with the reporting lag?
I’m excited to use these guys create my trifecta just put in an offer that was excepted for a business in Chandler Arizona going to create an S Corp.😅🎉
@@MiyaJeanLaroiiI worked for an accounting tax firm that did business taxes. Usually once a sole-prop/small business starts making about $40-50 thousand in Net Profit and we are there is going to be continuity……we start advising them to elect for the S-corp.
Couple questions say I’m starting a business that has to run for a few months then can get a higher certification and do more business with that cert, but if I change the the entity type I lose the cert and have to start over should I just start out as an s corp. also if I’m trying to start a business in ca but my license is in nv should my llc be in nv or in ca ? And if my llc is in nv can I register my city business licen in to that nv llc ? Or does the llc have to be in ca as well?
We got you! Head to our Main Street Tax Pro Network who help clients nationwide and would love to help you - please get connected to one of them here: taxadvisornetwork.markjkohler.com/
I have a LLC business without employees (providing design services) with Scorp Status. I pay myself and get a W2. My partner is retiring and removing himself as a member leaving me as a single member ownership. I plan on revising members to include my spouse with 51% (me), 49% (spouse). Spouse and I also have an LLC with an S-corp election status for a rental company (50/50 member split myself & spouse). I know I know, it shouldn’t be an scorp!. We have not used the LLC yet because we have not purchased a rental yet (in the works though). Planning on reversing the S-corp election on that LLC before acquiring a rental and quitclaiming property to the LLC. Am I on the right path here….?!?!
Terminating the S election would typically result in that LLC then becoming a “C” corp. just save or scrap that LLC and incorporate a new one and LEAVE it as a default partnership if the intent is to hold real estate in it.
You said you have an LLC, but pay yourself and get A W2. Are you saying you give yourself A W2? Because you can't do that an LLCs is a pass-through for taxes so your just creating more taxes.
@@brewdog8568 You're wrong. If an LLC makes an S-election, an owner-employee is actually REQUIRED to draw a W-2 salary for reasonable compensation. And they're not creating more taxes, they're lessening them. The remainder of the profit the LLC earns escapes payroll taxes (SS/Medicare) as the owner's distributive share is no longer subject to SE tax as it otherwise would have been had the LLC remained taxed as either a disregarded entity (if owned by a sole member) or a partnership if multi-member. Also, @laurak9472 terminating the S-election is considered a taxable event. If there's no appreciated property within the LLC yet, likely not any concern. I'd recommend discussing with your CPA first (or finding one if you don't already have one...) before you do anything. It might be worth closing that LLC and just starting a new one. Again, discuss with your CPA and possibly attorney too.
no you don't lol. perhaps you're misunderstanding. You will pay social security on the 160,000, but the money made past that won't. So let's say you made 200,000. 160,000 of that money will be taxed by social security while 40,000 will have no social security taken from it@@jimross2101
What if you're a full time day trader trading stocks making 500k. S-corp is the way to go? I heard if you have an S-corp 40k is the least amount you can pay yourself. Idk if that's true.
Are business loans from a 3rd party such as a lender guaranteed by me as a 100% shareholder in my SCorp contributions that can be added to my basis????
Only shareholder loans to an S Corp will give you “loan” basis (different than “stock” basis). In a partnership (the default treatment for a multi member LLC) you get debt basis for recourse debt and qualified nonrecourse debt.
Buy $1,000 worth of bitcoin with that every year, and historically speaking, it will appreciate +/- 135%/year. Do the math on that while considering the $1,000 will depriciate ~7-14%/year and that $1,000/year is definitely worth it.
Should my holding company be an llc taxed as a c-corp and my operating llc be taxed as a s-corp? The operating llc is for my real estate interior design business. Thanks!
Stop making things difficult for yourself. Forget about holding companies and c-corps and all that crap. Get one entity that’s an LLC and start from there. Most importantly you have to make money before you can even think about these types of strategies. And even if you are making money, you rarely need holding companies. They provide no tax advantages unless we are talking about SEP retirement plans. They provide some asset protection, but not much else. Then you need to file two tax returns and have two sets of accounting books, which will cost you $1k in tax filings plus accounting fees. Stop making business so difficult.
Typically, you only need one LLC for your business (unless you have others with partners or multiple successful enterprises). If you have other significant safe assets outside of a retirement plan or real estate investments, that would be in a separate entity. Most have too many entities, but everyone's situation and risk tolerance differ. These guys in the video are great to follow and learn more from.
I have two commercial rental properties and both are currently LLC's. Is it possible to file for "S" Corp status for 2023 and can this be done now before the end of 2023 or do I have to file it for 2024?
Mark, for the love of god can you please explain to people that they need an accountant before they think they can just file to be an scorp. It’s astonishing how many business owners don’t have an accountant and they watch some trash videos online by individuals who have no knowledge on taxes or accounting and they do everything wrong.
@@RichAyers yes. Don’t worry about incorporating. It’s no difference than starting an LLC. Then elect to be taxed as an scorp. LLC is a business structure/entity and scorp are not business entities. An scorp is a tax election created by the IRS. Let me know if you need help. I’m in the Florida area as well. St Pete to be exact. I have my own accounting and tax firm. We can swap contact info if you’re interested.
