If there is a way around this, I would love to know
I disagree with the statement about the IRS not caring if you pay out salaries. I can assure you they care. We have a lot of personal service clients (mostly doctors). It’s actually a high audit area for our client base. BUT that being said, we tend to the conservative side. Most of them pull at minimum $230k salary for full retirement benefits (They can then put $46k into profit sharing/401k, tax-free). I have heard some pretty lenient formulas, like $30k salary would suffice even for some of our clients. But I would never recommend a profitable S Corp. take no salary unless they want IRS knocking on their door.
tax at the federal level, on S corps! Some states do tax, but it is pennies. California is a whopping 1.5%. (more…)