The Top Tax Planning Strategies for S Corporations
The Top Tax Planning Strategies for S Corporations S Corporations offer a powerful way for small and mid-sized business owners to reduce their tax burden, but maximizing the benefits requires smart tax planning. By applying the right strategies, S Corporation owners can save significantly on federal and state taxes while maintaining compliance with IRS regulations. Here are the top tax planning strategies every S Corporation should consider. 1. Optimize Salary vs. Distributions One of the most well-known advantages of an S Corporation is the ability to split income between salary and distributions. As a shareholder-employee, you must pay yourself a "reasonable salary" for the work you perform, which is subject to employment taxes (Social Security and Medicare). However, any remaining profits can be taken as distributions, which are not subject to self-employment tax. Striking the right balance is crucial—paying too little in salary could trigger an IRS audit, while overpaying...