Best Tax Software for 2016 Returns?

[Buehler445]

Originally Posted by DRU

There are different ways people come up with "reasonable salary" for the W2 portion of an S Corp. Most that I've seen are some sort of a percentage, where at first they typically stick to a 50/50 split, but as the income increases, the percentage you have to take as W2 income goes down. So if you're talking about $50k, you should probably do at least $25k/$25k split.

If you're talking about $250k, paying yourself $80k W2 and the $170k as K1 is typically just fine. Again, it gets to a point where it wouldn't make any sense to pay a salary that high for the position in question. For example, hire somebody for $60k - $80k or whatever the position would require, and take rest as K1 income only. Don't even mess with W2 for yourself. Or again, if you're still doing that part yourself and paying yourself the W2, a CPA/tax pro would be just fine backing you up on that. You would have that discussion with them while coming up with the split that you're both comfortable with.

These are the sorts of things that do require looking at the individual scenario and fine-tuning the details to best suit your needs and stay within the tax laws legitimately. When you get to that point, though, you'll have a CPA there to help you with these sorts of plans, and of course as mentioned before, you want to make sure you have a CPA who is well versed in all of this stuff and doing the best to help you maximize your savings.

That's just what I've been told. I don't know if that's BS from my accountant, but she won't let anyone take more draws than their salary. Might be an audit flag.