For those who have a LLC/S corp hybrid to do your taxes, I am wondering if my calculation is sound as a "reasonable salary" for payroll.
For those who don't know, S corp is a pass through entity in which your dividends/bonus are NOT subjected to double taxation..only federal income tax is applied, while your payroll goes through federal income tax, state unemployment tax, and self-employment tax.
The IRS requires the CEO to pay themselves a "reasonable salary", or else $0.00 is subjected to self-employment tax(ie social security/medicare).
My formula for a retail optical (like Lenscrafters/Walmart/Target) that sees 65 pts/week are as follows.
15 minutes/pt (as this is the standard for retail)
55 dollars/hr (standard for a corporation like AB).
65/4= 16.25 hours worked in a week
+3 hours/week for insurance filing/ordering supplies
=19.25 hours/week X 52 weeks/year X 55 dollars/hr = $55,055 as your reasonable salary.
Gross: 65 pts/week X 52weeks X 60 dollars/pt = 200k/year
Expenses= 4000(cheap rents) to 25000(expensive rent).
Dividends after payroll = 119945k/year (assuming rent is the expensive type)
What do you guys think? Will I get audited because the dividend is so high?
An OD working for AB sees about 35pts/day, earning 400 dollars a day. Since my average is only 9pts/day(assuming I open all 7 days), then why should I pay myself 400 dollars a day as well? Just want to see the if the justification is sound if IRS decides to take me to court or audit my business.
For those who don't know, S corp is a pass through entity in which your dividends/bonus are NOT subjected to double taxation..only federal income tax is applied, while your payroll goes through federal income tax, state unemployment tax, and self-employment tax.
The IRS requires the CEO to pay themselves a "reasonable salary", or else $0.00 is subjected to self-employment tax(ie social security/medicare).
My formula for a retail optical (like Lenscrafters/Walmart/Target) that sees 65 pts/week are as follows.
15 minutes/pt (as this is the standard for retail)
55 dollars/hr (standard for a corporation like AB).
65/4= 16.25 hours worked in a week
+3 hours/week for insurance filing/ordering supplies
=19.25 hours/week X 52 weeks/year X 55 dollars/hr = $55,055 as your reasonable salary.
Gross: 65 pts/week X 52weeks X 60 dollars/pt = 200k/year
Expenses= 4000(cheap rents) to 25000(expensive rent).
Dividends after payroll = 119945k/year (assuming rent is the expensive type)
What do you guys think? Will I get audited because the dividend is so high?
An OD working for AB sees about 35pts/day, earning 400 dollars a day. Since my average is only 9pts/day(assuming I open all 7 days), then why should I pay myself 400 dollars a day as well? Just want to see the if the justification is sound if IRS decides to take me to court or audit my business.
