I am a small business owner. Now that tax season is here, I was wondering what is best way to minimize exposure to self employment tax?
I really appreciate any insight!
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Jim CPA
Posted 1 year ago #I'm assuming if you're concerned about paying self-employment tax that you're a sole proprietor or partnership. What you probably want to do is to form an s-corporation. You'd need to pay yourself a reasonable salary for the work you do and you'd still have to pay regular income tax on all your income, but you would avoid paying self-employment tax on the profits your business generates.
To do this, you'd need to form a corporation in your state, which you can do at the Secretary of State's website where you live. After that, you'd file a Form 2553 with the IRS, to declare yourself an s-corporation. There are lots of tricky in's and outs regarding this, so you should definitely seek professional help before doing anything.
Hope that helps.
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