If I become a Corp, how can this save me on taxes?

Question

A guy I know doesn't collect a paycheck like everyone else at work. He submits an invoice thru his corporation. Where can I find info on how this benefits him financially?

Answer 1

there are numerous tax benefits of incorporating. many people do this in order to deduct or "write off" expenses like telephone, rent, supplies, etc. especially if you have a home office. these expenses would not otherwise be fully deductible for an employee collecting a W-2.

http://www.havefunblog.com/the-news/latest-news/tax-benefits-of-incorporation.html

Answer 2

The only benefit to a corporation is the limitation on liability and minor benefits. Disability premiums are deducted by a c-corp. The problem here is that if you ever have to collect on the policy the benefit is taxable to you and you are only receiving 60% of your pre-disability income. You could have a long term care policy that you pay for in ten payments, fully deductible. If you can't afford to pay in ten payments then c-corp won't help. Other than some real minor items there is no difference with a c-cor The draw back to it is that if the corporation pays tax on retained income you will pay tax again if it is distributed as a dividend or paid to you in salary.
An s-corp save some taxes because income that you are taxed on that is not paid to you as salary is not subject to the FICA and medicare tax.
Your friend would have to be getting a salary thru his corporation. If he elected s-corp status and he is not taking a salary he is asking for trouble. The IRS has a new program looking for his situation. By not taking a salary he is giving up social security, a pension, health benefits etc. Some people lose site of reality by trying to save taxes. They end up losing many more dollars than the tax savings can generate