![Page 1: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/1.jpg)
Breakout Session: S Corps, Taxes & YouAssembled 2017
![Page 2: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/2.jpg)
Legal Disclaimer
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
No warranty or representation, express or implied, is made by ZipBooks, nor does ZipBooks accept any liability with respect to the information and data set forth herein.
![Page 3: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/3.jpg)
Breakout Session Roadmap
✓ The “corporate treatment” explained
✓ Become a corporation
✓ Prepare taxes like a corporation
✓ Save taxes like a corporation
![Page 4: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/4.jpg)
The “Corporate Treatment” Explained
![Page 5: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/5.jpg)
The “Corporate Treatment” Explained
Benefits of an LLC●Asset protection
●Pass-through taxation
●Larger retirement contribution limits
●Tax flexibility
![Page 6: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/6.jpg)
The “Corporate Treatment” Explained
Tax Flexibility● By default,
○ Single-member LLCs are treated as a sole proprietorship.
○ Multi-member LLCs are treated as a general partnership.
●LLCs can elect to be treated as an association taxable as a corporation
![Page 7: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/7.jpg)
The “Corporate Treatment” Explained
S Corporations Explained●An S corporation starts out as a regular corporation.
●Some corporations can be taxed under IRS subchapter S.
●An S corporation is a “disregarded entity” and pays no corporate taxes.
●S corporations pass its profits / losses to be taxed at individual tax rates.
![Page 8: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/8.jpg)
The “Corporate Treatment” Explained
S Corporation Wages and Capital Gains●Wages gets taxed as regular income.
●Shareholder income is not subject to self-employment (SE) tax.
![Page 9: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/9.jpg)
Become A Corporation
![Page 10: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/10.jpg)
Become A Corporation
Would my LLC qualify for IRS subchapter S treatment?
●U.S. corporation
●No more than 100 shareholders
●One class of stock
●Certain industries are ineligible (financial, insurance, international sales)
Source: 26 U.S. Code § 1362, Instructions for Form 2553
![Page 11: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/11.jpg)
Become A Corporation
Should I elect IRS subchapter S treatment?●Do you make more than an employee would in your same
position?
●What are your W-2 wages without your business?
![Page 12: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/12.jpg)
Become A Corporation
How do I file an S Corp election?●File a Form 2553 Election by a Small Business Corporation.
●Set up payroll for your corporation.
![Page 13: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/13.jpg)
Become A Corporation
When should I file an S Corp election?●Year 1: File the election within 75 days of receiving an EIN.
●Year 2+: File the election form by March 15th of the following year.
![Page 14: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/14.jpg)
Prepare Taxes Like A Corporation
![Page 15: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/15.jpg)
Prepare Taxes Like A Corporation
Quarterly S Corporation Tax Filings●Payroll tax filings: 941
![Page 16: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/16.jpg)
Prepare Taxes Like A Corporation
Annual S Corporation Tax Filings●S corporation tax return: 1120S
●Shareholder’s share of income: Schedule K-1
●Payroll tax filings: 940
![Page 17: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/17.jpg)
Prepare Taxes Like A Corporation
Personal Tax Filings●Schedule K-1 earnings show up on your Schedule E.
●When applicable, Form 1040-ES estimates quarterly tax payments.
![Page 18: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/18.jpg)
Save Taxes Like A Corporation
![Page 19: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/19.jpg)
Save Taxes Like A Corporation
Scenario 1: Full-time self-employed, single-member LLC
●Company net income: $120,000
●Annual wages: $75,000
●Shareholder income: $45,000
![Page 20: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/20.jpg)
Save Taxes Like A Corporation
Scenario 1: Full-time self-employed, single-member LLC
●Income Tax Bracket: 25%
●S Corporation - Eliminates SE Tax on distributions up to ~$120,000
●Tax savings: $6885
* Single-member LLC, married filing jointly
![Page 21: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/21.jpg)
Save Taxes Like A Corporation
Scenario 2: Part-time consulting●Consulting income: $40,000
●W2 income: $75,000
●Shareholder income: $40,000
![Page 22: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/22.jpg)
Save Taxes Like A Corporation
Scenario 2: Part-time consulting●SE Tax Rate: 15.3%
●S Corporation Tax Rate: Eliminates SE Tax on distributions up to ~$120,000
●Tax savings: $6120
* Married filing jointly, $60,000 AGI
![Page 23: Assembled 2017 Breakout Session: S Corps, Taxes & You](https://reader033.vdocuments.net/reader033/viewer/2022042906/589b0d341a28abb85d8b6671/html5/thumbnails/23.jpg)
Shameless Plug
ZipBooks provides bookkeeping, tax, and payroll services.
https://zipbooks.com/bookkeeping-services