Year-End Tax Planning for Subchapter S Corporations
S Corporations can help save small business owners tax. By working with an experienced and knowledgeable certified public accountant, you can reduce your overall tax burden and reap some positive benefits at the same time. It is vital to get credible year-end tax planning for Subchapter S Corporations to save you money and time.
An “S” Corporation is actually called a Subchapter S Corporation. These entities can be organized as a limited liability company or as a corporation. The biggest benefit of having a Subchapter S Corporation for some people is the ability to reduce the amount of Medicare, Social Security, and self-employment taxes on a portion of the profits of the business.
You are required to pay yourself a reasonable wage for your services to the business. The rule of thumb here to remember is that you should be taking at least half of your net income as wages. This is the portion that you will be paying your employment, Social Security, and Medicare taxes on throughout the year. The balance of your net income will not be subject to self-employment taxes. This will save you 15.3% in 2016.
If you do not take reasonable compensation for your services during the year, the IRS can claim that all of your net income is subject to this tax. Remember, starting this year, W-2’s must be filed no later than January 31, 2017.
Additional Year-End Tax Tips
There are other year-end tax planning tips for Subchapter S Corporations that can save you money. Paying bills before December 31st, including those not due until January can lower your net income. This includes utilities with January due dates, subscriptions, dues, and even meeting fees that are forthcoming and payable in advance.
This is also the time to look back on any independent contractors that you paid in 2016. If they were compensated more $600 or more, now is the time to have them complete a W-9 form. 1099 forms must be filed for these individuals by January 31, 2017.
Florida Annual Reports must be filed by April 30, 2017, to avoid steep penalties. This may be done as early as January 1, 2017, so it is recommended that you choose a date and put in on your calendar so that you do not forget.
This is also the time to go through your records and organize your receipts and expenses. The sooner you can get this to your tax professional, the better off you will be. Do not wait until March to start getting your records in order.
For help with tax planning, please contact your credible, professional, accessible local CPA, Randee Abramson for a free consultation.