S Corp Salary vs Distribution: How to Pay Yourself & Save 15.3% Taxes

Learn the crucial difference between S Corp salary vs distribution to optimize your tax savings. Discover how to pay yourself correctly as an S Corp owner, comply with IRS rules, and save 15.3% on self-employment taxes. This guide covers reasonable compensation, payroll setup, and common mistakes to avoid. Book your FREE consultation: https://book.freedomtaxaccounting.com/ CAPÍTULOS: --------- 0:00 Introduction: S Corp Pay Changes 0:26 S Corp Owner: Employee & Employer 0:50 Why a Reasonable Salary is Required 1:33 The 15.3% S Corp Tax Savings Explained 2:22 What is Reasonable Compensation? 2:56 Example: Setting Your S Corp Salary 3:29 IRS Penalties for Low S Corp Salary 4:17 Salary First, Then Tax-Free Distributions 4:42 Real Example: $120K Profit Split 5:05 How to Set Up S Corp Payroll 5:46 Common S Corp Payroll Mistakes 6:16 Recap & Final S Corp Tax Tips This video provides a comprehensive guide for S Corp owners on how to properly compensate themselves while maximizing tax benefits. It clarifies that S Corp owners are considered both owners and employees, necessitating a reasonable salary paid through payroll, which is subject to federal, state, and payroll taxes (Social Security and Medicare). The core advantage of an S Corp is highlighted: after paying a reasonable salary, any remaining profits can be taken as distributions, which are exempt from the 15.3% self-employment tax. The video details IRS guidelines for determining 'reasonable compensation,' considering factors like duties, experience, time commitment, industry standards, and company profitability, and warns against the severe penalties for setting an unreasonably low salary. It also outlines the practical steps for setting up payroll, including IRS and state registration, quarterly Form 941 filings, and issuing W-2s, recommending the use of payroll software or services for compliance. Finally, common mistakes S Corp owners make, such as skipping payroll or misclassifying payments, are discussed, with strong advice to consult tax professionals for personalized guidance. 🌐 CONNECT WITH US! Take your business, finances, and legal status to the next level. Visit our official websites: 🔗 Freedom Group (Main): https://freedomgroupfl.com/ 💼 Freedomtax Accounting: https://freedomtaxaccounting.com/ 🛡️ Freedom Insurance: https://freedominsurancefinancial.com/ ✈️ Freedom Immigration: https://freedomimmigrationusa.com/ --- 📱 FOLLOW US ON SOCIAL MEDIA Stay updated with our latest tips, news, and daily insights. 👥 Freedom Group • Facebook:   / freedomgroupfl   • Instagram:   / freedomgroupfl   • LinkedIn:   / freedomgroupfl   📊 Freedomtax • Facebook:   / freedomtaxinc   • Instagram:   / freedomtaxaccounting   --- 📌 Don't forget to SUBSCRIBE to our channel, give this video a THUMBS UP 👍, and hit the notification bell 🔔 so you never miss our valuable content! ⚠️ LEGAL DISCLAIMER: This video is intended for educational purposes only and should not be taken as legal, financial, or tax advice. You should consult with a professional about your unique situation before acting on anything discussed in these videos. Freedomtax Accounting and Multiservices Inc., Freedom Insurance Financial Inc., and Freedom Realty Source Inc. are providing educational content to help small business owners and individuals become more aware of certain issues and topics, but cannot give blanket advice to a broad audience. Regulations change constantly; therefore, this channel may not always contain the most up-to-date information. Neither Freedomtax Accounting and Multiservices Inc., Freedom Insurance Financial Inc., Freedom Realty Source Inc., nor its members can be held liable for any use or misuse of this content. #SCorp #TaxPlanning #SmallBusinessTaxes #SalaryVsDistribution #IRSRules