Ok, tax time around. LLC S-corp. My wife has her W2 and I do have mine. The profit is $100k. My tax accountant says I have to pay our tax bracket on this profit. In our case 30%. So $30k in taxes.
I get that I have to pay taxes but what is the best way to deal with this? I can’t predict the year end profit so I don’t want to pay quarterly.
How do you deal with this?
I am an s-corp too and yes, the s-corp designation means that instead of the company paying the income tax that income is treated as your income and you pay the income tax.
What I am going to do is pay myself the profits at the end of the year and pay the taxes. At the beginning of the year I will loan back to my company the overhead for 3 months. That will give them enough time to be self sufficient. At the end of the year, the company will pay back the loan + interest, distribute the profits for the year to me, and start the whole process over again. That way, anything I invest into the company (for equipment, etc.) also qualifies as a shareholder contribution.
How does that strategy lower your tax burden? The interest you earn your own money. It kind of doesn’t matter if you call it profit or interest. You still would be taxed on it.