SCOTTSDALE, AZ / ACCESSWIRE / September 25, 2019 / Certified Public Accountant (CPA), Jason Monroe Smith of Scottsdale, Arizona helps S-Corps reduce self-employment taxes. Small business corporation, Subchapter S corporation, or S-Corp is a special tax designation that allows corporations to pass their corporate income, credits, and deductions through to their shareholders.
"As with many tax laws, designating your business can be confusing and runs the risk of being double taxed and losing out on savings," said Jason Monroe Smith, CPA. "A CPA can help consult you and walk you through the steps of which designation is best, will save you the most money, and set you up for success long term."
Corporations are typically taxed at both the corporate and individual level. Subchapter S corporations help businesses avoid just that, which is beneficial to small or individually-ran businesses.
Jason Smith explains. "A sole owner that acts as the only employee generally pays a tax of over 15% on all profits. This includes Medicare and Social Security. With an S corporation, the taxes are split between the employee and corporation--7.65% respectively. Additionally, the S corporation does not need to use all of its profits as employee salaries. Some earnings can be used to pay shareholders. This type of payout is called a distribution and is not subject to the same self-employment taxes as the corporation and employee.
To qualify for S corporation status, Jason Monroe Smith explains that business must meet a set of strict requirements, which include the following:
The business must be a domestic corporation
The business must only have allowable shareholders. These include individuals, certain types of trusts and estates. Partnerships, corporations, and non-resident alien shareholders are not allowed.
The business must have no more than 100 shareholders.
The business must have only one class of stock.
The business must be an eligible corporation. Certain financial institutions, insurance companies and international sales corporations are not eligible, for instance.
Want to learn more about becoming a designated S corporation? Contact Jason Monroe Smith today.
About Jason Monroe Smith, CPA and CFP
Jason Monroe Smith is a Certified Public Accountant and Certified Financial Planner with over 17 years of experience. Located in Scottsdale, Arizona, Jason specializes in tax and financial planning. Jason Monroe Smith's in-depth CPA work has led to diverse experience and enabled him to work as an independent contractor where he prepares taxes, provides public accounting services, and performs financial planning services for small to mid-sized businesses.
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