R
rjscrivo
Guest
What is the name of your state? Arizona
I have a Question about S-Corporation taxes.
I was advised to set up two corporations. One based in Nv and my wife’s' in Az. The corp in NV would then be used as a service firm to services to my wife's S-corporation. By doing this (supposedly), she could write a monthly check (fee) to the NV corp. and reduce her income. The NV corp. would then not be subject to income tax. My question: why is that any different than incorporating in NV in first place & having clients write checks for tutoring, etc...? In other words, her corp. based in AZ is still writing a check (from AZ) to the corporation in NV. Therefore, the income for the NV corp. was generated in AZ and subject to AZ taxes, right?? Also, we don't live in NV, therefore, the NV corp. checking account would be in AZ and the monthly fees paid by my wife’s corp. to the NV corp. would never even enter the state of NV. Rather, they would be deposited into an AZ bank account with the NV corp. name on it.
Have I accurately described the situation?? If I'm wrong, and this strategy is legitimate, are there specific wordings required in the articles of incorporation for this to work with either the AZ or NV corporations? Also, how would you determine the amount of the monthly fee for services? My wife's monthly gross would be on the order of $1,250. Ideally, it would be nice to write a check for the entire amount but I'm sure that wouldn't go over too well. Could you write a check for as much as $600?
Here is the situation. My wife would be the only employee but also the owner. I may also try to sell some of my photography skills down the line and am also an owner. For now, lets assume I don't sell anything but am part owner.
S-corporation Taxes – how do they work? My wife has an S-Corporation and no employees
At the state level:
1. Is my wife considered an employee and therefore, must we withhold state income taxes like you'd see on a check from your primary employer
2. Must we make quarterly estimates for the income that goes into the S-corp bank acct that is NOT paid my wife in salary but paid as distributions? (I know that the rule of thumb is a 1:1 salary to distributions).
3. Are there self-employment taxes on the salary portion but not the distributions? Are the SE taxes part of the quarterly estimates or directly with held from the check?
4. Do we need a State Tax ID number if the corp only sells 'services' and not products? If we sell products as well as services, must we get a State tax ID number?
At the Federal Level
1. Do we have to consider my wife as an employee and withhold Social Security, Medicare, Federal Income tax and unemployment and match those withholdings using the corp's income? Since my wife is the owner, do we need to withhold the unemployment tax?
2. On which income do we make quarterly estimates? The distributions or the salary?
How does all of the above fit with the S-corp status? Everything I read seems to contradict everything else! Can you suggest a comprehensive ($100 - $200) software package that would walk us through this?
I have a Question about S-Corporation taxes.
I was advised to set up two corporations. One based in Nv and my wife’s' in Az. The corp in NV would then be used as a service firm to services to my wife's S-corporation. By doing this (supposedly), she could write a monthly check (fee) to the NV corp. and reduce her income. The NV corp. would then not be subject to income tax. My question: why is that any different than incorporating in NV in first place & having clients write checks for tutoring, etc...? In other words, her corp. based in AZ is still writing a check (from AZ) to the corporation in NV. Therefore, the income for the NV corp. was generated in AZ and subject to AZ taxes, right?? Also, we don't live in NV, therefore, the NV corp. checking account would be in AZ and the monthly fees paid by my wife’s corp. to the NV corp. would never even enter the state of NV. Rather, they would be deposited into an AZ bank account with the NV corp. name on it.
Have I accurately described the situation?? If I'm wrong, and this strategy is legitimate, are there specific wordings required in the articles of incorporation for this to work with either the AZ or NV corporations? Also, how would you determine the amount of the monthly fee for services? My wife's monthly gross would be on the order of $1,250. Ideally, it would be nice to write a check for the entire amount but I'm sure that wouldn't go over too well. Could you write a check for as much as $600?
Here is the situation. My wife would be the only employee but also the owner. I may also try to sell some of my photography skills down the line and am also an owner. For now, lets assume I don't sell anything but am part owner.
S-corporation Taxes – how do they work? My wife has an S-Corporation and no employees
At the state level:
1. Is my wife considered an employee and therefore, must we withhold state income taxes like you'd see on a check from your primary employer
2. Must we make quarterly estimates for the income that goes into the S-corp bank acct that is NOT paid my wife in salary but paid as distributions? (I know that the rule of thumb is a 1:1 salary to distributions).
3. Are there self-employment taxes on the salary portion but not the distributions? Are the SE taxes part of the quarterly estimates or directly with held from the check?
4. Do we need a State Tax ID number if the corp only sells 'services' and not products? If we sell products as well as services, must we get a State tax ID number?
At the Federal Level
1. Do we have to consider my wife as an employee and withhold Social Security, Medicare, Federal Income tax and unemployment and match those withholdings using the corp's income? Since my wife is the owner, do we need to withhold the unemployment tax?
2. On which income do we make quarterly estimates? The distributions or the salary?
How does all of the above fit with the S-corp status? Everything I read seems to contradict everything else! Can you suggest a comprehensive ($100 - $200) software package that would walk us through this?