Five Missed Tax Deductions: Part 5: S Corporation
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In this video, you’ll discover the fifth and final tax strategy especially beneficial for TCG Business: forming an S Corporation. This structure can significantly reduce your self-employment tax by allowing part of your income to be treated as profit rather than salary. The walkthrough explains how you start as a sole proprietor, transition to an LLC, and then elect S Corp status for tax purposes. With a simple example, it shows how a $100,000 profit could save you around $9,000 in self-employment tax. While income tax may slightly increase, the overall savings and flexibility—including paying your kids or exploring additional deductions—make this a powerful move for resellers looking to keep more of what they earn.
🔹 Becoming an S Corporation offers major tax advantages, especially in reducing self-employment tax for profitable resellers.
🔹 With a $100,000 profit, assigning $40,000 as reasonable compensation means the remaining $60,000 avoids self-employment tax.
🔹 This structure can save approximately $9,000 in payroll taxes annually compared to a sole proprietorship.
🔹 You start as a sole proprietor, form an LLC, then elect S Corp status for tax purposes—while still operating the same business.
🔹 Additional strategies like paying your kids can further reduce taxable income, depending on how aggressive your accountant is.
Watch the whole version here:
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