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self-employment taxes

Self-Employment Taxes

Posted Wednesday, November 8, 2023

WCG CPAs & Advisors and Jason Watson, CPA, have released the 2023-2024 Edition of Taxpayer’s Comprehensive Guide to LLCs and S Corps. Over 400 pages of pure pleasure! This edition has updated 2024 data such as IRA and 401k limits including Social Security wage limits, but it also has a bunch of new information spread out various chapters such as customized multi-entity structures, expanded reasonable shareholder salary sections, more tax reduction mechanics among various little tidbits gleaned from hundreds of small business consultations. Riveting!

We have several examples showing how the Section 199A works, why S corporations remain a great tool for tax savings and why reverting to a C corporation is a bad idea. We also discuss entity formation, S Corp elections, reasonable shareholder salary and business tax deductions. Frankly the Section 199A stuff is only about 40 pages of the material… the rest is good ol’ fashion business stuff!

It is available in paperback for $59.95 from Amazon and as an eBook for Kindle for $49.95. Our book is also available for purchase as a PDF from ClickBank for $39.95. Why do we all love 95 cents? We all know that 39.95 is really 40 bucks. At least we are not like gas stations… $39.949. Silly! Yet we digress. Apple iBook, Barnes and Noble Nook, among others are not utilized since their format is challenging to make mini updates here and there.

Before you spend your money, we encourage you to review the highlights below and download a sample of Taxpayer’s Comprehensive Guide to LLCs and S Corps by using the following button, or the electronic yet full version from our KnowledgeBase-

But if you saying to yourself, “Self, just get the darn book and start taking care of business” then click on one of the buttons below-

Here are some testimonials to make you feel better (of course we only picked the good ones… just like referrals)-

Ronny R. says, “I enjoyed it! Gave me lots to talk about with my CPA.

Britt S., Esq. says, “Thank you so much for speaking with me last week! You are amazing and I greatly appreciate all of the information you emailed me. I am in complete adoration of your book!”

Lisa A. says, “Detailed information about the pros and cons of creating a small business. Lots of great detail about the tax benefits and consequences. NOT a ‘dummies’ book – it assumes you already have some background knowledge.

Brett B. says, “I read your ‘Comprehensive S Corp’ book. Wow. You blew my mind. I thought I understood S Corps.”

Larry M. says, “I found it helpful, but could have gone into a little more detail. There is one main way to save money as an s corp, and how to determine ‘how much you can get away with’ could have been expanded on a bit more. Otherwise, pretty good guide.

M.S. says, “Great read for first time self-employed corp owners. Covers all the main basic of taxes and caveats. Well written and simple to understand for those not well versed in tax law.

If you buy our 430-page book and think that we didn’t help you understand small business tax law or the benefits of S corporations, let us know. We never want you to feel like you wasted your money. If you are ready to add some insightful reading into your day, click on one of the preferred formats. Amazon is processed by Amazon, and the PDF is safely processed by ClickBank who will email you the PDF as an attachment.

self-employment taxes self-employment taxes self-employment taxes
$59.95 $49.95 $39.95

Book Edition

Current release is 2023-2024 Edition. Please email us to let us know you want an updated version, and we will ship free of charge. You may also want to visit our blog to catch up on some recent guidance and other issues surrounding small businesses-

Avoid Self-Employment Taxes

How can I avoid self-employment taxes? This simple question was the inspiration for creating an article describing the benefits of an S Corporation. That original article, which was about four pages long, quickly became a series of KnowledgeBase articles on the WCG website. The articles touched on basic topics such as how to elect S Corp status, shareholder payroll, reasonable salary determination and liability protection. Those broad topics demanded much more information, both horizontally by spanning into more related issues, and vertically by digging deeper into the granular yet riveting levels of the tax code. Beyond general S Corp benefits, our 2023-2024 edition of this book will show you-

  • Entity Structures and Custom Multi-Entity Arrangements for Tax Efficiency
  • Deal Structures, Operating Agreements
  • The Fallacy of Nevada Corps
  • State Taxes, Nexus, FBA Problems, and Liability
  • S Corp Benefits, Tax Savings
  • Avoiding Self-Employment Taxes
  • The 185 Reasons an S Corp or LLC Might Stink
  • Forming and Operating an S Corp
  • Late S Corp Election
  • Determining Reasonable S Corp Shareholder Salary
  • Section 199A Business Tax Deduction
  • Tax Deductions, Fringe Benefits, Kids on Payroll and Cars
  • Properly Paying for Health Insurance
  • Small Business Retirement Planning with Your Small Business

So here we are on our tenth iteration, or the 2023-2024 Edition. Unlike Tax Cuts and Jobs Act of 2017 and COVID and the three major pieces of tax law which was the basis for the Ninth edition, these changes are primarily focused on the little things. There are also several examples and little comments that come from the hundreds of consultations we do each year. Nothing tests your bad idea like the public, and people are full of wonderful stories and inquiring minds. All this leads to more fodder for the book!

Each week we receive several phone calls and emails from small business owners and other CPAs across the country who have read our Taxpayer’s Comprehensive Guide to LLCs and S Corps and praised the wealth of information. Regardless of your current situation, whether you are considering starting your own business or entertaining a contracting gig, or you are an experienced business owner, the contents of this book are for you.

While this book’s origins were based on reducing self-employment taxes through an S Corporation election, it has dramatically expanded to sound business advice from entity structures to operational considerations to business tax deductions and retirement planning.

This book is written with the general taxpayer in mind. Too many resources simply regurgitate complex tax code without explanation. While in some cases tax code and court opinions are duplicated verbatim because of precision of the words, this book strives to explain many technical concepts in layperson terms with some added humor and opinions. We believe you will find this book educational as well as amusing.

Enjoy! And please send us all comments, hang-ups and static. This book is as much yours as it is ours, except the tiny royalty part- that’s ours. Stop by and we’ll buy you a beer with the pennies.

Here are some additional resources-

S corporations remain a critical tax saving tool for two reasons. First, the usual self-employment tax savings remains intact for all business owners including specified service trades or businesses. Second, a business owner might need to pay W-2 wages to himself or herself to not be limited by income, and only corporations can pay W-2 wages to owners (in other words, an LLC cannot without an S Corp election). Read the article above for riveting information!

This information is also incorporated into our book including examples and calculations. Happy Happy Joy Joy!

Business Advisory Services

WCG CPAs & Advisors specializes in small businesses who generally have fewer than 25 employees. Why? We want to help people, and more importantly we want to help the business owner directly. Frankly speaking, once a business gets to a certain size management layers get in the way of owner access. Access allows us to ensure the owner(s) are leveraging the most out of their business for themselves and their families.

Because small business is a core competency for us, we have created business advisory service plans which include these really cool things-

A la Carte* Vail Telluride Aspen

2024 Tax Planning and Preparation

Tax Planning, Tax Projection Worksheets $350 to $500 Pro-Active* Pro-Active Biz Advanced
Annual Tax Reduction, Shifting and Deferral Analysis $350 to $500
Small Business Tax Deductions Optimization Included
Section 199A QBI Deduction Tax and Salary Optimization $300
Estimated Income Taxes (via increased payroll withholdings) Included
Business Entity Tax Return (Form 1065, 1120, 1120S) $1,500 starting
Individual Tax Return (Form 1040, joint filing), One Owner $800 starting
Expat / Foreign Income Calcs (Form 2555, FBAR, Form 8938) $300 to $500 Add-On Add-On Add-On
Tax Resolution, Audit Defense Varies As Req'd As Req'd As Req'd
Financial Planning, Calculations, Discussions $900 to $2,500 Add-On Add-On
Situational Tax Law Research (up to 3 hours annually) $750 to $1,000

Payroll and Accounting Services

Reasonable Shareholder Salary Calculation (RCReports) $500
Monthly Shareholder Payroll Processing (includes spouse, kids extra) $1,200
Employee Payroll Processing (bi-weekly, direct deposit) Varies Add-On Add-On Add-On
Annual Payroll Processing (W-2s, other filings, up to ten 1099s) Included
Accounting Services (bookkeeping + analysis... see below) Varies Add-On Add-On Add-On
Quarterly QuickBooks Consulting (QuickStart Launch) $250, $750 Add-On

Business Advisory Services

Consulting
Business Consultation, Periodic Business Reviews (PBR) $250 to $1,000 Annually Routine Routine
Complimentary Quick Chats (CQC) $250 to $500 Routine Routine Routine
CPA Concierge Services Varies Add-On Add-On
Interfacing with Lenders, Attorneys, Financial Planners $750 Routine Routine
Financial Analysis
Fractional Controller (monitoring 3rd party bookkeeping) Varies Add-On Add-On Routine
Quarterly Financial Statements Analysis, Comparisons $1,200
Annual Cash Flow Management and Analysis $1,500 to $2,500
Annual Budgeting, Forecasting, Goal Setting $750 to $1,000
Annual First Research Reports, Industry-Focused Consulting $350 to $600
Annual National and Metro Economic Reports $150
KPI Analysis, Benchmarking, Hot Sheets, Trend Analysis $500 to $1,500
Strategy and Maintenance
C-Level Financial Advice, Strategic Planning (Fractional CFO) Varies
Succession Planning, Ownership Changes Consultation $750 to $1,000 Routine
Annual Business Valuation $2,500 to $3,000
Annual Corporate Governance, Resolutions, Meetings $150 + filing fee
Annual Fee $4,320 $7,560 Custom
Monthly Fee $360 $630 Custom
(prorated based on onboarding date)

* Yeah, we all dislike the little asterisk. The gotcha! The fine print! Well, here is one of those situations. Pro-active and Pro-active Biz are different. Pro-active tax planning is limited (for individuals and households) and does not include business-entity tax payments, pass-through entity tax (PTET) calculations and payments, among other things. Please see our Tax Planning Services page and Master Service Agreement for more information.

Custom! Unlike the modern day new car packages where you have to spend $8,000 for the moonroof, our Business Advisory Service plans can be customized specifically for you. The array above is simply a starting point. If you need more or less from us, let’s chat about it!

tax patrolTax Patrol Services

We also have Tax Patrol! This is a wonderful tax service for those who don’t need all the business advisory bells and whistles above, but from time to time want some love from an experienced tax consultant and business advisor. Have a quick tax question? Need to know the depreciation rules as you buy that new car? Wondering what your April tax bill is going to be in August? Tax Patrol is like ski patrol… you might not use it, but you sleep better knowing you have it.

A la Carte* Keystone Copper Breck
Individual Tax Return Prep (Form 1040, joint filing) $800 starting
Business Entity Tax Return Prep (Form 1065, 1120, 1120S) $1,500 starting
Tax Planning, Tax Projection Worksheets $350 to $500 Streamlined Pro-Active* Pro-Active*
Estimated Tax Payments Calcs Included
Tax Resolution, Audit Defense NA Add-On Add-On Add-On
Complimentary Quick Chats (CQC) $250 to $500 Routine Routine Routine
Annual Fee $1,500 $2,100 $3,180
Monthly Fee $125 $175 $265
(prorated based on onboarding date)

* Yeah, we all dislike the little asterisk. The gotcha! The fine print! Well, here is one of those situations. Pro-active and Pro-active Biz are different. Pro-active tax planning is limited (for individuals and households) and does not include business-entity tax payments, pass-through entity tax (PTET) calculations and payments, among other things. Please see our Tax Planning Services page and Master Service Agreement for more information.

We also have Investor Patrol Services for our real-estate minded clients who are building an empire and need tax return preparation, tax planning and comprehensive rental property related tax assistance.

Additional Business Services

The following are additional business services to get your venture launched and on the way. Some of these are teased out separately as one and done fees like formation and onboarding stuff.

Accounting, Payroll

Monthly Accounting (bookkeeping + analysis) starting at $500 / month
Bi-Monthly Accounting (bookkeeping + analysis every 2 months) starting at $250 / month
Quad-Monthly Accounting (bookkeeping + analysis every 4 months) starting at $175 / month
Custom, Off-Menu Cadence inquire within
Sales Tax, Personal Property Tax typically $75 / month, $150 / quarter
Employee Payroll (direct deposit, bi-weekly) 1 employee, $100 / month
2-5 employees, $175 / month

Fine Print: Accounting fees are based on 2 bank account with less than 250 monthly transactions but does not include the QBO fee from Intuit. Custom quote is available if you have a lot going on such as third-party integrations (POS, time billing system), accrual accounting method, extensive benefits packages and / or industry specific issues (e.g, job costing in construction).

Even Finer Print: Employee payroll can be added only if already using our Business Advisory Service plans above (e.g, Vail). Custom quote for more than 5 employees and a referral to therapy.

Business Formation

Articles of Organization or Incorporation, or Dissolution $625 + state filing fee
Initial Report (if required) $125 + state filing fee
Annual Report $350 + state filing fee
Employer Identification Number (EIN) Included
Single Member Operating Agreement (SMLLC) Included
MS Word Templated Bylaws Agreement (Corporations) Included
S Corp Election, Timely Election (made with formation) Included
Accountable Plan Included

Onboarding (one and done fees)

Payroll Accounts Setup, Transfer, Closing $550 to $650 depending on state
Employee Data Transfer $25 per EE, >5
Accounting Setup or Transfer (Fractional Controller) Varies
QuickStart QuickBooks Setup and Support (90 days) $750
S Corp Election, Timely Election (within 75 days) $450
Late S Corp Election Back to January 2023 $600, $1,200 after Jan 1 2024*
Examine Prior Tax Returns Included

For late S Corp elections back to January, we have a split fee of $600 or $1,200… and it depends on if we can file your S Corp by March 15. Ideally, we attach the late S Corp election to the tax return and file both electronically. Yay! Conversely, if we cannot file on March 15, we also cannot electronically extend the tax return. As such, when we file in June or July, it is now considered late. We can usually have the penalties abated, but it takes effort hence the additional $600 fee (the $600 v. $1,200). Be a hero, and get us your stuff right away to save a few bucks and trim down the anxiety.

Business Maintenance

Entity Relocation Package (payroll closure and opening, entity move) $800 (some are $1,050) + state filing fees
Address Changes w/o Payroll (IRS, State Dept of Revenue, Secretary of State) $250 + state filing fees
Address Changes with Payroll (above + state and local payroll agencies) $350 to $450 + state filing fees

Our entity relocation package includes closing your current payroll accounts, opening shiny new ones, moving your entity with the Secretary of State (if applicable) and updating addresses as necessary.

Speaking of address changes… these are tough. Basic address changes require IRS, State Department of Revenue and Secretary of State notifications. Address changes that include payroll add another level of complexity since departments of revenue are not the same as departments of labor, and there might be local or municipal agencies as well.

Advisory Services Fine Print

A la Carte

A la Carte fee ranges are approximates. 85% of our clients fit into these fee ranges, but there are outliers. We have a handful of clients with over 30 rentals; their individual tax return is north of $4,000. We also are assuming one state; if your business spans the galaxy then additional fees will be discussed with you prior to payroll setup or tax preparation. Typically each state or tax jurisdiction is around $250 to $350 for tax preparation since it affects both your business and individual tax returns (frankly, state apportionment is a pain in the butt, but it is our pain… and states, especially California and New York, are crazy about it).

Prorated Fees

Some more things to consider- when a partial year remains, our usual annual fee is pro-rated to not charge you for services you didn’t use (like payroll and consultation). However, a large chunk of our annual fee is tax preparation which is typically a built-in fixed amount of $2,300 (both business entity and individual tax returns) plus annual tax planning. Whether we onboard you in January, July or December, we have to prepare a full year tax return. This increases the monthly fee for the remaining months of 2024 but the monthly fee will later decrease in January of 2025 to reflect the amounts above. Yeah, we make it sound like 2024 is just around the corner.

Payroll Processing

We make very little profits on payroll processing… we offer it as a convenience to our clients. One throat to choke with a single call can be reassuring but if you want to run your payroll, go for it! Everyone thinks payroll is a piece of cake; write a check and done. Nope… we see a lot of mistakes being made by clients especially the handling of health insurance and HSA contributions since there are special rules for greater than 2% S Corp shareholders. Then again, we don’t mind fixing what was broken.

Tax Returns

You can prepare your own individual tax return as well… but the benefit WCG preparing both individual and business tax returns is that we slide things around depending on income limitations, phaseouts, alternative minimum tax (AMT), Section 199A deduction optimization, pass-through entity tax deductions (PTET), etc. Having our arms around both can yield some good tax savings!

Note: An individual tax return is what the IRS calls Form 1040 and refers to the entity filing the tax return (you, the individual, are the entity). However, a married couple are deemed to be one entity for the sake of an individual tax return. So, when we say we will prepare your individual tax return, it is meant to include your spouse in a jointly filed tax return.

Break-Even Analysis (does an S Corp make sense?)

Break-even analysis is based on our annual fee of $4,320. If an S corporation saves you 8% to 10% (on average) in taxes over the garden-variety LLC, then $4,320 divided by 9% equals $48,000 of net ordinary business income (profit) after expenses and deductions.

More sales pitch! Keep in mind that our fee of $4,320 includes your individual tax return which you might already be paying another tax professional to prepare. WCG has a handful of clients who are right at the break-even point of $48,000 but leverage an S Corp and our services to get tax preparation, tax planning and consultation.

No BS

We are not salespeople. We are not putting lipstick on a pig, and trying to convince you to love it, even if Tom Ford’s Wild Ginger looks amazing. Our job remains being professionally detached, giving you information and letting you decide.

We see far too many crazy schemes and half-baked ideas from attorneys and wealth managers. In some cases, they are good ideas. In most cases, all the entities, layering and mixed ownership is only the illusion of precision. Just because you can complicate the crap out of your life doesn’t mean you must. Just like Chris Rock says, just because you can drive your car with your feet doesn’t make it a good idea.

Next Steps

Here is a brief summary of the next steps should you want to engage WCG with Business Advisory Services or Tax Patrol-

1. We schedule an appointment to discuss your needs and ensure that we have the proper resources to help you.

2. We draft a proposal outlining the scope of services and our fixed annual fee.

3. If necessary, we schedule another appointment to review the proposal and perhaps tighten things up or make changes.

4. Once the proposal is signed, the fun begins with onboarding. We have an extensive checklist and internal task list to properly onboard you and your business. Some things are concurrent (such as gathering housekeeping docs and setting up payroll) and some things are sequential (for example, collecting financial data and then offering salary recommendations and creating a tax plan). Onboarding is like having a baby; a SWAT team shows up and does a zillion things, and poof, everyone is gone except for mom and baby.

5. After onboarding (usually 4-6 weeks), things settle down into a rhythm- Tax preparation in the spring, tax planning in the summer, with payroll and routine consultation bouncing along throughout the year.

WCG business expertise

Our Business Expertise

As mentioned elsewhere we primarily focus on small business owners and their unique consultation and tax preparation needs. With 60 full-time consultation professionals including Certified Public Accountants, Enrolled Agents and Certified Financial Planners on your team, WCG CPAs & Advisors consults on custom business structures, multiple entity arrangements, S corp elections (even late S corp elections back to January), tax strategies, business coaching, industry analysis, executive benefits, retirement planning including individual 401k plans, exit strategies, business valuations, income tax planning and modeling, and tax representation.

We also work with business law attorneys for business owners who have additional needs such as drafting Operating Agreements, fee for service contracts, buying or selling a business including employee stock ownership plans and partner buy-ins. In addition, WCG coordinates with third party plan administrators such as Polycomp and RPS to create age-based profit sharing plans and cash balance (defined benefit) plans. We can run point on whatever your business needs to ensure that communication is effective and efficient allowing you to sell widgets.

Here are some additional resources you might find useful.

WCG CPAs & Advisors is a full-service yet boutique progressive tax, accounting and business consultation firm located in Colorado serving clients worldwide.

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