We made the transition to S Corp during 2015.
The financial benefit comes from avoiding the Medicare Tax (employee and employer and the additional ACA Medicare taxes for the employee). And remember too, some states (including GA) have the option for the S Corp to pay the shareholder's state taxes. This allows S Corp shareholders to circumvent some of the $10K SALT limit. The Medicare tax savings is running around $20K per shareholder for us.
Excellent point made on the audit risk for where you set the W2 wages for an S Corp shareholder. I would argue that whatever you are paying a new rad is a reasonable W2 wage limit for an established shareholder. A new rad is being paid to perform the same work as an S Corp sharesholder. Amounts earned above this amount could be seen as profits of the S Corp.
My thoughts on a great topic.....Chris
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R. Christopher Sluder CPA
Administrator
Rome Radiology Group
Rome GA
(706) 291-2661
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Original Message:
Sent: 02-07-2023 13:30
From: Joshua Dorsey
Subject: S vs C Corp - Tax Implications
Hello,
Our group is an LLC registered as a C Corp for tax purposes. We are looking at changing from a C to an S Corp because of some small tax savings for the owners by taking distributions as opposed to W2 wages for bonus. It also would decrease tax burden significantly should the group ever decide to sell the company (although this is extremely unlikely as of today). Is there anyone that is currently an S Corp that would caution against making this change? Any issues that have popped up for those that may have transitioned from a C to an S Corp in the past?
Our accountant recommendation is to make this change but wanted to gather any feedback RBMA members may have.
Thanks,
Josh
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Joshua Dorsey
Chief Executive Officer
Radiology Associates of Northern Kentucky
Crestview Hills KY
614-284-1597
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