I'm confused by what a reasonable salary has to be before I can start taking dividends.
Last year my income from my ecommerce sole proprietorship was about $40,000. I'm considering creating a wholly owned S-corp, with the intention of lowering my tax liability by paying myself a lot less than $40k in salary, and taking the rest in dividends. It would have to be a big enough difference to offset the $800 CA annual corporate tax and possibly hiring an accountant for the more complex structure I'm faced with.
The below article seems to suggest that a "reasonable" salary that an employee must take before taking dividends is determined by the IRS looking at several factors, including similar professionals' benchmark salaries, the % of net sales, and how much personal effort the employee puts into the business.
Forbes Welcome
With my business, many people simply place orders online, so some of it runs with minimal work required daily. I'm engaged in other pursuits, and going forward I expect to work about 20 hours a week in this business. Maybe I should figure I'm paid minimum $20/hr and therefore $21,000/yr is a reasonable salary?
Is there even a tax form that clarifies why I'm taking only $21,000 in salary?
What if my business made only a meager $15,000 one year? Would it be unreasonable to take any dividends at all, given that $15,000 isn't even a very big salary for the work I'm putting in?
Last year my income from my ecommerce sole proprietorship was about $40,000. I'm considering creating a wholly owned S-corp, with the intention of lowering my tax liability by paying myself a lot less than $40k in salary, and taking the rest in dividends. It would have to be a big enough difference to offset the $800 CA annual corporate tax and possibly hiring an accountant for the more complex structure I'm faced with.
The below article seems to suggest that a "reasonable" salary that an employee must take before taking dividends is determined by the IRS looking at several factors, including similar professionals' benchmark salaries, the % of net sales, and how much personal effort the employee puts into the business.
Forbes Welcome
With my business, many people simply place orders online, so some of it runs with minimal work required daily. I'm engaged in other pursuits, and going forward I expect to work about 20 hours a week in this business. Maybe I should figure I'm paid minimum $20/hr and therefore $21,000/yr is a reasonable salary?
Is there even a tax form that clarifies why I'm taking only $21,000 in salary?
What if my business made only a meager $15,000 one year? Would it be unreasonable to take any dividends at all, given that $15,000 isn't even a very big salary for the work I'm putting in?
Aucun commentaire:
Enregistrer un commentaire