Essential Tax Tips for S Corporation Success
By: Nestor Caballero CPA
Being an S Corporation presents unique taxation opportunities and challenges. Here are this week's tips, specially tailored for your S Corporation.
Tip 1: Optimize Salary and Dividend Payments
An S Corporation allows you to take a reasonable salary and also distribute profits as dividends, which aren't subject to self-employment tax. Balancing these can provide significant tax savings, but make sure your salary is not "unreasonably low" to avoid IRS scrutiny.
Tip 2: Make the Most of Health Insurance Deductions
Premiums for health insurance covering more than 2% shareholders in an S Corp, their spouses, and dependents are deductible by the corporation. Make sure to include them in the shareholder's wages to reap this benefit.
Tip 3: Be Mindful of Basis Calculation
Remember, an S Corporation shareholder can only take losses to the extent of their 'basis' in the corporation. This includes capital contributions and earnings, as well as certain loans. Regularly tracking your basis will ensure you don't overlook any available deductions.
As your trusted tax advisors, we're here to assist you in implementing these strategies and to answer any questions you may have. Feel free to contact us to discuss these tips or any other tax matters.