We wanted to give everyone a heads up about the upcoming deadline to elect to be taxed as an S Corp, which is on March 16th, 2020. If you apply by that date, your business will be considered an S-Corp for 2020.

Two ways electing to be an S-Corp can help save you money:

1. Your profits are not taxed as self-employment income
2. It lets you write off your salary, which lowers your payroll taxes.

What's the catch?

Well, S Corp owners are required to pay themselves a "reasonable salary" as employees, and that salary is subject to payroll taxes. That means you need to setup a payroll system and have the cash flow to be able to support a monthly payroll to yourself.

Aren't taxes withheld when I pay myself a salary?

Technically, yes. When you pay yourself a salary from your S Corp, the personal you gets paid. In addition to that, your income and payroll taxes are deducted directly from your paycheck (so you don't have to worry about having enough money to pay them off later). Also, now your S Corp has the ability to write off your salary and its portion of your payroll taxes, which reduces your year-end taxable profits.

Will I still be able to take distributions?

Absolutely! If you have money left over in the bank after all expenses are paid (including your salary), you will be able to take a distribution just like normal.

So, if I have a certain net income, when should I switch?

Unfortunately, there is no magic number that indicates it's time to switch. If you wanted to see an example of Net Incomes ranging from $20K - $250K and the tax implications, view this page here*. Until you start making over $20-$40K of net profits annually, you won't benefit much from switching to or starting an S Corp.

*Calculations were estimated as a Single Filer for Tax Year 2019, please be aware each tax situation is different

Can Hall Accounting Company do this for me?

Of course we can! We not only can file the necessary form to get you set up to be an S Corp, but we can get your payroll setup, as well as run the payroll for you.

Contact Jeremy Hall or Josh Hall if you would like this service. We look forward to a great 2020 being apart of your growing business. If there is anything you ever need, please do not hesitate to reach out.

MARCH IMPORTANT DEADLINES

3/16/20

Partnership and S-Corp Tax Returns Due

IRS Deadline for Tax Returns Due (Form 1065 and 1120-S), must file extension if proceeding beyond this date

3/20/20

Individual and C-Corp Preparation Documents Due

In order to file timely, we will need all documents in by this date

OTHER FUTURE IMPORTANT DEADLINES

4/15/20

Individual and C-Corp Tax Return Due

IRS Deadline for Tax Returns Due (Form 1040 and 1120), must file extension if proceeding beyond this date

4/15/20

Estimated Quarterly Tax Payment for 2020 Tax Year Due

IRS Deadline for Quarterly Estimated Payments for 2020 (Form 1040-ES)

4/15/20

Deadline for SEP-IRA or Solo 401K Funding

Deadline for SEP-IRA or Solo 401K Funding for Tax Year 2019

4/15/20

Deadline for SIMPLE-IRA Establishment

Deadline for Self-Employed or Small Employers to Establish a SIMPLE-IRA

6/15/20

Estimated Quarterly Tax Payment for 2020 Tax Year Due

IRS Deadline for Quarterly Estimated Payments for 2020 (Form 1040-ES)

9/15/20

Partnership and S-Corp Tax Returns Due, if extended

IRS Deadline for Tax Returns Due (Form 1065 and 1120-S), must file extension if proceeding beyond this date

9/15/20

Estimated Quarterly Tax Payment for 2020 Tax Year Due

IRS Deadline for Quarterly Estimated Payments for 2020 (Form 1040-ES)

10/15/20

Individual and C-Corp Tax Return Due, if extended
Deadline for SEP-IRA or Solo 401K Funding for Tax Year 2018

10/15/20

Deadline for SEP-IRA or Solo 401K Funding, if extended
Deadline for SEP-IRA or Solo 401K Funding for Tax Year 2019, if extended

1/15/21

Estimated Quarterly Tax Payment for 2020 Tax Year Due
IRS Deadline for Quarterly Estimated Payments for 2020 (Form 1040-ES)