Tax Guru – Ker$tetter Letter

Q:

Subject: Re: Tax Accountant for C-corporation

 

Kerry,

 

Thank you very much for your advice. I will contact one of the accountants on the list that you mentioned.

 

I have been asking many people in my same situation, which type of corporation they have opened, and ALL of them say S-Corp. I opened a C-Corp because I didn’t know any better when I did it, but am planning on changng to S-Corp.

 

In that article, you mention how a C-Corp is better, but do you think an S-Corp is better in my situation. I will be doing technical consulting.. and will be the only employee in my corporation. The people I mentioned earlier, who opened an S-Corp, are all in my situation and say that with an S-Corp you will pay Way less tax. Also, fica, state, and other taxes will be much less as well (One mentioned that with S-Corp fica tax will be 7.5% while 14.5% with C-Corp). Just FYI, my annual income will be approx. $250K.

 

I don’t mean to take up too much of your time, but just wanted to ask your opinion because of your expert knowledge in the subject matter.

 

Please let me know at your earliest convenience.

 

Thanks!

A:

It is impossible for me, or anyone else, to give you a proper answer as to what the best entity would be for your particular unique circumstances without asking you dozens of very personal and probing questions. Anyone who pops a one size fits all answer off without an interrogation is dangerous and should be avoided at all costs.

Comparing your situation to anyone else’s is crazy and can only lead to big problems.  There is nobody else in the universe who has the exact same situation as you do; so what may be appropriate for someone else is irrelevant. 

It is also very likely that the other people with whom you discuss this are actually doing the wrong things for their unique circumstances because they tried to set things up on their own without proper professional assistance.  You would then have a classic case of the blind leading the blind.

Whoever told you that FICA taxes are less with S than C corps is obviously clueless as to how things work.  Payroll taxes are exactly the same for wages paid by either kind of corp.

Work directly with a tax pro.

Good luck. 

Kerry Kerstetter