Paying Yourself a W-2 as a Sole Proprietor?

Paying Yourself a W-2 as a Sole Proprietor?

Jul 31, 2019 Tax by Kevin Noles
Many Sole Proprietors and Partnerships are envious of the Section 199A 20 percent deduction.  Because of this, they turn to paying themselves W-2 wages to reduce their tax burden.  WRONG! 

A Sole Proprietor or Partner may not be W-2 employees of their own Sole Proprietor or Partnership.  Neither does using a Certified Professional Employer Organization (CPEO) create the possibility of paying W-2 wages to Partners or Sole Proprietors. 
What you must do instead is elect to be treated as an S or a C Corporation.  When you elect being an S or a C Corporation, many tax benefits are available to you, the owner.  

If your company nets $150,000 a year, you can reduce your tax burden from $16,000 down to $13,000 or less!  It could be more! Every $1,000 you save in taxes is like a $1,100-1,300 pay increase!  The average business over pays $11,000 in taxes a year!

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