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Originally Posted by jyl
Looking for tips and education. I'll be consulting a CPA about this but just want to get some thinking first.
Pay myself a low salary and take the rest as distribution. Supposedly this minimizes self employment taxes or something.
As you can tell I have no idea so throwing it open for ideas.
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The CPA (retired IRS agent of 30 years experience) we consulted with several years ago when my wife was starting up self-employed, he recommended she take 50% of the proceeds as income and the remainder as a distribution. He explained the 50% threshold is one that the IRS won't contest as tax-avoidance. Anything less - and it can cause problems if audited. We took his guidance.
Edit - and yes - you won't have to pay both sides of the SS on the distribution portion of the income - only on the salary, so it does save you that.