Quote: (02-12-2014 02:55 PM)deuce Wrote:
I've been working as an independent contractor since early 2011. I've already realized the myriad of everyday purchases that can be legitimately written off when working as an IC, but I would like to hear some tax avoidance (not evasion) strategies people are willing to share.
I have set up an S corporation and pay myself as a W-2 employee through the corporation. I am sure to pay myself "reasonable compensation" pursuant to IRS guidelines.
Is the W-2 status hurting me, even though my compensation, while reasonable for my career field, is quite a bit less than my total revenue? Or am I on the right track using the S corporation to avoid the taxation associated with filing as a 1099?
Please be sure to think about what you post in the clear. Thanks!
If you pay yourself reasonable comp compared to others in your field in a similar situations (not just job title, but equity position as well) then you are fine.
Quote: (02-12-2014 04:53 PM)RX2 Wrote:
In regards to the wage and net-income planning, my attorney encourages to allocate at least 1/3 of your net-income to 'wage earnings' and the remaining amount can flow out as a 'dividend' or 'net-income' not subject to Self Employment tax. Just make sure you do proper payroll planning with quarterly reports as they're required but the system can be simple and affordable.
An attorney gave you this advice? This is not good advice and it could possibly cost you big if you were ever audited. If that is advice that you paid for I would get a new attorney or CPA.