I opened my single member sport consulting LLC one week ago. Based on the new tax reform and knowing that I will make around $120,000/$150,000 in 2018, is it worth to apply for a S corp status, considering payroll cost, deductions and State taxes? Thank you!
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Tax Professional Answers
John Stancil
As an S Corp, you must pay yourself a reasonable salary but you don't pay Social Security or Medicare on the profits above and beyond the salary. If you file as an LLC (sole proprietorship) you will pay income tax and social security/Medicare on the full profit. So whether it is worth it depends on how much social security and Medicare taxes you are avoiding. As an example, if you made $150,000 and paid yourself a $70,000 you would have $80,000 not subject to SS and Medicare. That is close to a $12,000 savings.
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327 weeks ago