When it comes to self-employed taxpayers: it’s all about self-employment taxes. Year-after-year customers are hit with 15.3% of self-employment tax on top of their regular income tax.
We talked with our friends at Formations and here's what they had to say about saving taxes.
According the Formations, filing as an S-Corporation is the golden ticket for small to medium-sized businesses.
Here are 3 steps you can take to keep more cash in your pockets:
- File S-election and reduce your SE taxes an average of 40%: An S-Corporation’s revenue is split into 2 types: salary, and profit. These two are taxed differently. As an S-Corp you pay the payroll taxes only on the salary portion of the revenue, while the rest of the profit is payroll tax-free. This is an easy way to save thousands of dollars of tax money in your pocket every year! Why give that money away?
- Health Insurance: Enjoy the benefit of health insurance like any corporate employee. You deserve it! There are tax benefits available to you by running your health insurance premiums through your company. These benefits are not subject to employment taxes, and running them correctly through your payroll – you get a deduction on your personal tax return.
- SEP & Solo 401k: Retirement is another great reason to take a salary. Self-employed retirement programs define their contributions limits based on the amount of W-2 wages taken by S-corp officers. S-Corp owners can put much higher sums into retirement if they take the proper salary. The more you can put into retirement now, the less ordinary income tax you will pay in the year!
That’s life as an S-Corporation. Huge tax savings!
Ready to take on your 2020 taxes and set yourself up for a successful 2021?
Join us on Wednesday, December 9th, 2020 at 11:00 AM PST to learn from the best about how to finish 2020 tax-season strong, and start 2021 even stronger! That's why we partnered with Formations to offer this brand-new, free workshop just for you 👉 Click here to save your spot