Paying Social Security Taxes

[450EXC]

I just read an story in the paper that said the Amish were exempt from the SS system.

If you show a loss you don't have to pay. I think you can only get away with that for 5 years though.

 

[randy41]

Randy, had an S corp.

that makes sense then.

 

[thatguy]

When my wife started her practice (S corp) the accountant only had her draw a min salary (~1,000/mth) that all taxes were taken out of.. then we withdrew 'owner equity' and had to pay tax on that amount on our tax return.. Essentialy we saved the difference between our tax bracket rate and what we would have paid into state/fed/ss taxes. I think it was like 5% savings..

They said we could get by with that for a yr or two, but then we would have to start bumping up her salary to something 'reasonable' (whatever that is) for her profession and take less owner equity.

We did get by with the company not paying the SS in, but also my wife didnt get that credited to her for future payout.. To be honest I would have rather pay my wife on a W2 and not have to make qtr estimated tax payments..

brian

 

[Dale_Alan]

Just remember, if you don't pay in or you underreport your income to pay less into the system, then don't gripe because you only get $300 a month.
Dale

 

[Alan L.]

Using an S corp and paying only a "reasonable" salary is good strategy. However for those who wish to maximize their contributions to an employee benefit plan like a SEP, a lower salary means a lower allowable contribution.

To get around estimated tax payments consider having the S Corp pay a bonus at yearend, all of which goes for taxes. Whereas estimated tax payments are due quarterly, any amount paid via withholding is treated as though paid in 4 equal quarterly installments.

 

[tallyho8]

If Social Security is going to play a major role in your retirement income, then you need to be sure to do some planning years in advance of your retirement date. I didn't, and I wish I had.

The amount you will collect doesn't depend just on how much you paid in over the years but also depends on when you paid it. The amount you pay just years before retiring will most likely determine your full benefit.

I worked many hours for many years paying quite a bit in and then in my later years right before retirement I decided to take it easy and work less and enjoy life more because I didn't really need the money. But, paying less in SS tax for the last few years dramatically reduced the benefits I receive today.

I would encourage anyone who is nearing retirement age to study the recent Social Security regulations to see how their benefits are determined and they can make a decision on how much they want to work and report based on these findings to receive the highest benefits.

 

[Bird]

I would encourage anyone who is nearing retirement age to study the recent Social Security regulations to see how their benefits are determined

Very good advice, even for those who are not nearing retirement age.

 

[DUMBDOG]

Compensation... I friend of mine owns a successful contracting business he started 35 years ago. He does not take a salary. The bulk of his income is derived by renting his warehouse and equipment yard to his contracting business. His other income was dividends from the corporation.

This would not stand up under audit by a qualified IRS agent.

 

[randy41]

This would not stand up under audit by a qualified IRS agent.

that is true...but the risk of an audit is not very great. it is also a very complicated issue as to how to determine what reasonable compensation is.
i have also seen audits by state tax people who are looking at unemployment insurance issues determine that the taxpayer(shareholder) by not taking salary is avoiding unemployment tax. then they assess and tell the feds. you see where this is going.

 

[jinman]

For those interested, this article is on Yahoo! today (11/28) in the financial section.

Baby Boomer's Guide to SS