Introducing OUR S-Corp Tax Savings Calculator

Today, we're excited to announce a powerful new tool from the team at Better Bookkeeping. Our new S-Corp Tax Savings Calculator shows you in seconds how much you could be saving in taxes by structuring your business as an S-Corp.

Here's how it works:

1. Enter your annual business profit
2. Input a "reasonable salary" for your role
3. Share a bit about your business and personal tax picture
4. Instantly see your potential annual tax savings
5. Schedule a consultation to discuss implementation

The S-Corp Advantage

The magic of an S-Corp lies in how your income is taxed.

As a sole proprietor or LLC, you pay 15.3% self-employment tax on ALL your profits. As an S-Corp, you only pay employment taxes on your salary, while the remaining profits can be taken as distributions free from self-employment tax

Let's look at a real example:

The Practical Reality of Running an S-Corp

Operating as an S-Corp does come with additional requirements:

• Payroll Requirements: You must run payroll for yourself (most do monthly or quarterly), withhold taxes, and file payroll tax returns. I recommend Gusto to my clients, but there are many good options.
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• Reasonable Salary Test: The IRS requires your salary to be "reasonable" for your industry and role. Too low, and you risk an audit; too high and you lose out on real tax savings.
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  I tell my clients that their salary should reflect what they would pay someone with the same skills, experience, and credentials to perform the same services in their industry. A common rule of thumb is that your salary should be at least 30-60% of your business profit, but this varies by industry and circumstances.
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• More Formal Accounting: You'll need clean books with clear separation between business and personal expenses, but if you've been following me you already know the value of clean books for any type of business.
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• Additional Tax Forms: S-Corps file Form 1120-S (due March 15) instead of reporting on your personal return's Schedule C.
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• State Requirements: Some states have additional S-Corp taxes or fees (though most follow federal treatment).

Is an S-Corp Right for Your Business?

The calculator gives you a quick estimate, but the real question is whether an S-Corp fits your specific situation. Some questions to consider:

• Is your business consistently profitable?
• Can you justify a reasonable salary in your industry?
• Are you prepared for some additional compliance requirements?
• Does your state require additional taxes or fees from S-Corps?

If the results catch your attention (they usually do), book a quick call. We’ll review these questions and help you figure out if switching to an S-Corp makes financial sense for you.

Take care,

Mitchell Baldridge, CPA, CFP®

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