Just stumbled across your channel - interested to see more! Questions... 1) Possible to pay more in distribution than payroll or is that a red flag? Example: Reasonable salary is $40K but I pulled in $100K for the year. Can I payroll $40K and distribute $60K? 2) Is reimbursing for expenses the same as knocking down taxable income by deducting those expenses from the income? 3) Would love to learn about the retirement buckets, i.e. employer side profit sharing and employee side company retirement account. I know this is way simplifying but would love to at least understand a basic guideline like x% goes to payroll, x% goes to distribution, x% goes to cra, and x% to profit sharing.

@JamieTrull

Ай бұрын

Thanks for checking out my page! It is definitely possible to pay more in distributions than payroll. The 50/50 and 60/40 rules that some accountants use really aren't supported by IRS guidance at all and may result in overpaying your salary and losing tax savings. For example, if you have a team doing most of the work in your business, that's definitely a case where it likely would make sense to have a much lower salary %. Salary is all about the active work you are doing in your business, additional profit is essentially your compensation for being an owner. 2) Essentially the impact will be the same, yes. A deduction for the business and not taxable income for you. 3) I'll keep this in mind for future content, thanks for your recommendations!

@camaperture8116

Ай бұрын

@@JamieTrull your reply earns you a like and subscribe! Thanks for answering my questions. One quick followup / clarification and one separate question... 1) With respect to my first question about being able to pay more in distribution than payroll, does it also apply for a single member S-Corp to possibly pay more in distributions? Without triggering an audit flag. I'm the only employee of my company. 2) I've always heard various figures for how much someone needs to make to justify an S-Corp - anywhere from $50K to over $100K. I don't understand this. The annual cost for me to run an S-Corp is $800 to the Franchise Tax Board and about $700 to have those taxes done. Total: $1,500. So don't I really only need to get $1,501 in tax benefit to justify having an S-Corp? Looking forward to watching your other videos!

Very informative

@JamieTrull

2 ай бұрын

Glad it was helpful!

Great content. I’ve been told to not take a distribution by my tax preparer and to just pay myself more. I’m like…how? The other thing is, if I pay myself through payroll, do I have to deposit the check or can I just transfer it to my personal? Same with how I pay my kids.

@JamieTrull

2 ай бұрын

Hello you may want to check out this video I made about paying yourself kzread.infounYQHCwiRRQ

Awesome content, Jamie. I've watched all of your S Corp videos, but still am left with one question: Do I have to be a W-2 Employee of my S Corp and run my payments through some sort of payroll software for all of this to work? Or is it possible to be a 1099 Independent Contractor of my S Corp and just write myself a check? Or does this defeat the whole purpose? Also, I'm finding mixed reviews on the deadline for making the S Corp Election... If I want my LLC to be treated as an S Corp for 2024, when would I need to file my 2553 by? Thanks!! Keep up the great work.

@JamieTrull

4 ай бұрын

Thanks for the kind words! To answer your questions: 1) you should be an actual W-2 employee of your business, not a 1099 contractor. Taxes will need to be withheld. Most people find it easiest to do this via using a payroll service. 2) technically the deadline for Form 2553 is 75 days after your year end (or 75 days after LLC formation). You can make a late election though. I walk through it all in my S Corp Toolbox ;). Https://JamieTrull.com/scorptoolbox

Very informative content. I wish I found you beginning of 2023. I'm doing 2023 tax return 1120S. But this year, if I didn't cut W2 salary for myself, can I just expense "owner distribution" and "reimbursement"?

@JamieTrull

Ай бұрын

Glad you found it helpful! You won't expense owner distributions, if they weren't paid via W-2 they will be considered owner's draw which reduces your equity but does not impact your P&L. It is possible if you are ever audited the IRS could come back and reclassify some of these earnings as salary however and require you to pay payroll taxes on a portion of your distributions.

I haven't yet watched a video (in general ... not necessarily just yours) that addresses part time self employment for Scorp. My Gross profit is around 60K but after being a full time parent, the majority of my uninterrupted work day is usually 4 hour avg per day ( between 3-5 hours a day ) which is 20 hours a week for me, but I have a high margin product I make and sell. Does the IRS not believe part time hours when considering reasonable comp?

@JamieTrull

7 ай бұрын

They definitely do! In fact, the way that the "many hats" approach to reasonable compensation works is that you actually go by the amount of hours you work and the job duties you perform to come up with your reasonable salary. I actually partner with a company called RC Reports to provide a personalized reasonable compensation study and report using this approach. jamietrull.com/rcreports

When reimbursement is paid that is tax free does that pay come from your net profit thus reducing your distribution profit?

@JamieTrull

3 ай бұрын

Yep that's correct.