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Video instructions and help with filling out and completing Where 940 Schedule R Form

Instructions and Help about Where 940 Schedule R Form

Hey, thanks for joining me, guys! My name is Will Lopez, and I'm the founder of Advisor Phi Comm. Today, I want to talk about why you should consider the S corporation (S corp) status and how to complete form 2553, which is the IRS form to elect S corp status federally. I often get asked by small business owners all across the country how they can save money on taxes and properly structure their corporation. The key to achieving these goals lies in understanding and electing the S corp status. So, what exactly is the S corp status? It is a federal tax status that you need to elect, and the IRS allows you to do so by filling out form 2553. Once the IRS processes your form, they will send you a letter confirming that your corporation or LLC has been qualified for S corp status. LLCs can also elect this status. Now, here's something people may not know: LLCs default to a tax position that is not S corp status. For sole proprietorships with one owner, the default tax status is generally sole proprietorship. For LLCs owned by one person or entity, it is a disregarded entity. For LLCs owned by two or more people, it is considered a partnership. And for LLCs owned by corporations or other entities, it is a partnership. These default tax statuses expose sole proprietorships, disregarded entities, and partnerships to self-employment tax, which includes Social Security tax and Medicare tax. This means that you will be subject to the full realm of Social Security self-employment tax, which amounts to 15.3% of your bottom line income. Keep in mind that this does not include federal and state income taxes if applicable. However, electing S corp status can help you save a lot of money. Default tax statuses for...