How business owners may be able to reduce tax by using an S corporation - Crawford Ellenbogen

Do you conduct your business as a sole proprietorship, wholly
owned LLC or partnership? If so, there may be a way to cut your tax bill by
using an S corporation. The self-employment (SE) tax is imposed on 92.35% of SE
income at a 12.4% rate for Social Security up to $137,700 for 2020 and at a
2.9% rate for Medicare. An extra 0.9% Medicare tax is imposed on income
exceeding $250,000 for married filers and $200,000 for singles. But if you
conduct your business as an S corp, you’ll be subject to income tax, but not SE
tax, on your share of the business income. But the S corp must pay you a
reasonable salary. Contact us if you’d like to discuss conducting your business
as an S corporation.