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MequonCPA
MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2327
Experience:  CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
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Can I shift all my income to a s-corp or LLC then distribute

Resolved Question:

Can I shift all my income to a s-corp or LLC then distribute the net income to me

as qualified dividend so to pay 5% ( Under 25% Tax bracket ) or 15% Income TAX

and skip all the FICA tax
Submitted: 3 years ago.
Category: Tax
Expert:  MequonCPA replied 3 years ago.

Hi and welcome to JustAnswer:

 

A qualified dividend is a distribution from a C corporation. Income passed through from and LLC or an S corporation is generally taxed at your incremental tax rates.

Customer: replied 3 years ago.

So use S corp or LLC pass through income only save FICA tax,

 

If use C corp, use excess income to do a define benefit retirement plan, is this way

 

skip FICA tax and double taxation ( Corp pay income tax, share holder pay dividend tax ) ?

Expert:  MequonCPA replied 3 years ago.

1. S corp, must pay reasonable salary subject to FICA. Salary deductible expense. Net income also taxable on personal return.

 

2. LLC, all income taxable on personal return and subject to self employment tax.

 

3. C Corp, double taxation. Income taxable to corp. Distributions not deductible, but taxable to you @15% federal. Would not recommend no salary. Again reasonable salary should be paid.

Customer: replied 3 years ago.

C corp has $240,000 net income, if individually owned,

 

Can I pay $50,000 salary, balance $190,000 to do a define benefit retirement plan,

 

Is the deferred $190,000 subject to any Tax ?

 

Is it the same with S corp or LLC ?

Expert:  MequonCPA replied 3 years ago.

Contributions to a defined benefit plan are based on earned income, years to retirement and benefit amount and benefits already funded. The contribution must be determined by an actuary.

 

Assuming you could make a contribution in that amount, yes it would be deductible. The benefit would be taxable to you when you entered retirement.

Customer: replied 3 years ago.
so $190,000 earned income subject to Fica tax, only thing can be deferred is income tax ?
Expert:  MequonCPA replied 3 years ago.
The $190K avoids FICA if it is an employer contribution to a defined benefit plan.
Customer: replied 3 years ago.

 

If setup define benefit in S corp or LLC, tax deductible and the $190,000 subject to Fica Tax ?

 

 

Expert:  MequonCPA replied 3 years ago.

I'm sorry, but I've answered way more than one question. If you would like additional answers, please ask another question.

 

 

 

MequonCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2327
Experience: CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.
MequonCPA and 7 other Tax Specialists are ready to help you

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