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How is an s corporation taxed?
Posted by admin on Mar 17th, 2009
king asked:
let’s say, an s corporation makes a profit of a 100k a year with only one owner/shareholder. the one owner takes all the profit of a 100k as his income. in what procedure is he going to get taxed? is it better for an owner to say he earned 70K as income and 30k in dividends or 100k income all together will save more on taxes?
let’s say, an s corporation makes a profit of a 100k a year with only one owner/shareholder. the one owner takes all the profit of a 100k as his income. in what procedure is he going to get taxed? is it better for an owner to say he earned 70K as income and 30k in dividends or 100k income all together will save more on taxes?
income tax, 30% in Untied States
and yes still the 30% applies if you try to scam through dividends. Although i suggest skimming if you know what i mean
When the S corp is taxed it does not make a difference for income tax whether it is a dividend or salary.
The biggest issue to consider is FICA taxes. The salary will be subject to FICA tax but the dividends will not. You can experience substantial tax savings by paying out the money as dividends. Be careful though because the IRS requires that any S-corp pay its officers a reasonable salary so that someone does not avoid all FICA taxes.