An LLC with $250,000 revenue and $190,000 net income can save over $10,000 by electing S-corp status. Pay yourself $60,000-$70,000 in salary to avoid roughly $18,000 in self-employment taxes, then take the remaining $120,000 as distributions. The 20% QBI deduction on that amount generates another $7,000 in savings.
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My wife's LLC generates net revenue. She probably is bringing in, let's say, $250,000, maybe $60,000 in expenses, and she's taking home $190,000. My accountant, albeit conservative, guided me that the S election, after everything is said and done, would save us approximately only $2,000 to $3,000. If she has over $184,000 of net revenue, I would argue day and night her payroll should not be any more than $60,000, $70,000. Take $60,000 in payroll. You would save over $18,000 in FICA cost. And then you say, well, if you do that, then your QBI deduction goes down because QBI is only on the K-1. Well, your K-1 would be approximately $120,000, which is a deduction, mind you, a deduction, not tax savings, of 20% of whatever the K-1 is. Well, 20% of $120,000 K-1 would be a $24,000 deduction. And if you're in a 30% Bracket, that means you would save $7,000 in taxes. But what you do miss is the QBI on the $60,000. Okay, I'm going to miss out on $3,000 in write-offs, but I save $18,000 in self-employment tax. The bottom line is, Mugs, you're going to save well over $10,000 in taxes. And then their argument is, yeah, but there's additional accounting. For what?
