There are several reasons why S Corp business owners should carefully plan their W-2 wages. Did you know, there are tax and business consequences when you pay yourself as an S Corp business owner? Let’s review a few reasons why small business owners should plan their W-2s ahead of time.
Before we get started, here is a summarized description of the difference between a salary and an owner’s draw (or simply, a draw):
Here are some of the reasons why S Corp business owner salaries should be planned:
In summation, take time to plan owner salary amounts. This will help you save money and comply with IRS rules. Owner wage amounts have tax and business consequences, that is why it is important to think through your tax planning strategy, ahead of time.
Mahoney CPAs and advisors are here to help in any way they can. Contact tax consultant and associate director Peggy Prall if you have any questions.
Read our blog on Pass-Through Entity Tax, for more information on this topic