$300,000 s-corp owner reduces taxes and increases QBI Deduction with Traditional and Roth 401k
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- เผยแพร่เมื่อ 12 มิ.ย. 2024
- In this video, I'm doing a walk-through on an S-Corp to lower federal income taxes, increase QBI deduction and maximize your retirement savings. The split between your w-2 wages and distributions goes beyond just payroll taxes and reducing your contributions to social security. The breakdown of your income also can affect your Section 199A deduction and the amount you can contribute to your retirement plan.
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Thank you so much. 2021 is my first year with s-corp. I didn't have payroll service. Can i still deduct wages from my 1120-s???? thanks
nope. They were due already.
How are you calculating the federal tax amounts in both scenarios?
Like this th-cam.com/video/f0TIwsVHH88/w-d-xo.html
Travis, Thanks so much for explainging this. I have a question... doing books for an S Corp and I have alway hear that 60/40 is a good rule of thumb. 60 Wages 40 Distribution which would not be taxed just lower this basis in the company. With it being November and he is looking at around 350,000 in profit. Can they company just add to his solo 401k and reduce the 350,000. He is doing a SEP already Thanks for your imout.
You can't have both plans together.
I'm trying to wrap my head around why Federal income tax is more on the 100k side ($43,138), than the 50k side ($41,473). What is that number based on?
I don't get this part either.
My wife and I are high earners (not self employed). We're considering purchasing rental properties (inside an LLC / S-corporation) to reduce our taxable personal income. Is this the correct route or is there a better way?
It won’t really benefit tax wise but it’s a good idea for liability separation. The business income flows through to your personal tax return.
does your distribution affect your total gross income when qualifying for tax credits or is it just the amount you make on the W2?
Depends, distributions can actually be taxable or non-taxable. If taxable, yes.
@Travis Sickle well now I'm even more confused. Lol. do you have a video on taxable or non-taxable?
@@Jesse-es5fg money earned this year gets taxed. If you leave money in the business account and take it out next year, it’s not taxed. That’s because you paid tax on it last year.
@@Jesse-es5fg distributions and w2 income are both taxed, but only w2 is included with self employment tax. Distributions are not.
@Travis Sickle . Right, so you have your w2 that is fully taxed. Your distributions or "leftover money your business makes" is taxed but at a lower rate because it is not subject to self-employment and payroll tax, but is it considered "Gross Income" when filling for credits?
And how can your distributions not be taxable?
If you are a single tax payer in this example, wouldn't you have an issue of your QBI deduction getting phased out? What would you do in this situation?
Increase your w2 wages.
How did you get $41,473 for the fed
This way th-cam.com/video/f0TIwsVHH88/w-d-xo.html
Thanks for the video. I was SMLLC (sole proprietor) in 2021 (the year I was let go from my employer and decided to start my own business). I have been operating in 2022 under this current structure but I want to convert to an S-Corporation. I know Form 2553 needs to be completed. My question is when the S-Corp election would be deemed to start and is this date the date when I would be able to start paying myself a salary?
did you find out the answer? I'm running my payroll before they approve me but now I am wondering if I should do that.
This is great - thank you!
I’m getting from this that the higher the w2 the more you save and more you put away for retirement? Is that correct?
Yes, but also don’t increase that w2 anymore than needed to save the amount you want. I should also point out that you need to pay yourself a reasonable salary regardless but if you’re saving then that shouldn’t be an issue.
“Reasonable” sounds arbitrary. 72k a year.. what are the changes of saving betwee 8k-12 k? What should the salary be?
Thank you, very useful!
I am who you're talking about in this video. My bookkeeper told me yesterday that I'm going to owe $30K+ plus in taxes for the year of I don't do somethings before December 31st. We took my salary from $30k to $81k. Now I'm scrambling to figure out how to setup a SEP IRA or solo 401K. I'm considering whether to lease a car, which I wouldn't do otherwise. I also need to bring on another independent contractor to increase expenses, and buy computer equipment for my business that I've known all year I need to buy. What else can I do??? How much can I give to my church? What else??
pay yourself a reasonable salary, not more, unless there is another reason. A short term rental may help too. I'm not a fan of spending money more than you need. @ $81k, you'll be able to save more with a solo 401k.
Through research, I actually knew almost all of this already; but had I found this video originally, it would have definitely been a time saver to condense everything lol. Great video! Is there a good contact for you, Travis?
travis.sickle@sicklehunter.com
Nice video Travis. I did not understand where are the after-tax contributions coming from? From W2 or from distributions? In the first scenario with $50k W2, can I do a pretax employee contribution of $19.5k and then an aftertax contribution of $38k?
No you need to have the income for the employee side contributions which include the nondeductible. th-cam.com/video/hh9XfAF0uSM/w-d-xo.html
Thank you, appreciate you taking the time to walk through this complicated - many -moving part - calculation. My brain hurts!
So, let's move on to retirement when there's no real guidelines for percentage of Salary vs Distributions...oh boy, sounds crazy. Like walking blind into a fire-pit
I’m not sure what you mean.
Hi
100k is probably not reasonable. You need to do a study and warn clients of possible problems. You have oversimplified.
Ah, but you didn't watch the whole video. th-cam.com/video/FM4NF0-e4Ls/w-d-xo.html
This is super useful. I've seen a bunch of articles / videos on this, but actually walking through an example really made it click.