S-Corps & Accountable Plans
An S-Corp can be a powerful tool, but it is not a shortcut or a one-size-fits-all solution.
The savings from an S-Corp usually come from reducing self-employment tax. But to get those savings, you must play by the rules: run payroll, pay yourself a reasonable salary, keep clean books, and manage distributions properly. When structured correctly, an S-Corp helps business owners keep more of what they earn while creating a professional business structure.
S-Corp Areas We Target
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S-Corp Election Review: Does it make sense based on your profit level, business type, payroll costs, and tax savings?
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Self-Employment Tax Planning: Splitting income between reasonable W-2 wages and owner distributions to minimize SE drag.
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Reasonable Compensation: Figuring out what a "reasonable" salary is based on your role, hours worked, and business profitability to keep the IRS happy.
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Payroll Setup: You generally cannot just take draws. You need proper payroll implementation.
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QBI Deduction Review: Evaluating how wages, business profit, and industry type affect the 20% Qualified Business Income deduction.
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Shareholder Basis: Tracking basis so owners understand whether losses are deductible and distributions are taxable.
The Accountable Plan
An Accountable Plan allows your S-Corporation to reimburse you (the owner-employee) for business expenses you personally pay—without those reimbursements being treated as taxable income.
Without an Accountable Plan, reimbursements you take are considered taxable wages (meaning you pay income and payroll tax on them). With it, the business gets a deduction, and you receive the cash tax-free.
What Can Be Reimbursed?
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Home office expenses (mortgage interest, rent, utilities, internet). You cannot take the standard home office deduction easily as an S-Corp owner—you must use an Accountable Plan.
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Vehicle mileage or actual vehicle expenses.
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Cell phone and internet used for business.
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Office supplies, software, travel, and meals paid personally.