Does a small business owner save taxes by including his own salary as an expense?

Question

If the salary is included as an expense, then the income tax for the business is less, but of course, the owner has to pay his own income tax. So is it better to not pay yourself a salary and somehow finesse it so that you deduct everything and pay no income tax? References would really help here. Thanks!

Answer 1

Since this is a small business, I assume it is not incorporated.

A sole proprietor cannot pay himself a salary. Partners also do not pay themselves salaries but pass through income to the partners, which is entered on the individual returns.

So the answer is no, you cannot deduct everything and pay no income tax.

Answer 2

By small business Im assuming you mean a sole proprietorship. A sole proprietor doesnt pay himself a salary. The income gets reported on Schedule C on his personal tax return, so the owner is paying his own income taxes AND self-employment tax on the net profit from the business.

A benefit is that a sole proprietor can hire his spouse, or other family members as employees, and deduct their salaries as expenses.

Answer 3

No they don't look to be lame, there is largely lots benefit to changing and additionally you of course have not any thought so why not learn till now you're making a judgmental and idiotic assumption? Small enterprise is already at their optimal tax type and that they are in a position to't in simple terms substitute and benefit, any variations they could make might in all probability be for the extra serious because of fact they're already set to the terrific they are in a position to do. of direction their are people who're not sharp on place of work work and so not working optimally, yet your ordinary ignorant answer isn't helping everyone, and no, they are in a position to't pass all detrimental by potential of in simple terms switching. in the event that they could what may be the factor of adjusting the tax situation besides? Huh? Duhh? those persons are the biggest to getting us out of our undesirable economic device, and that they are in a position to't now because of fact they're hampered and strangled by potential of government, and that's and not making use of a tax boost. extra taxes make it even worse. The rules are so undesirable it expenditures them $10,000 a year according to worker to handle the recent crap Obama's laid on them. in case you decide directly to have a clue, I propose you hear to those that are affected, you're clueless.

Answer 4

you are paying double tax. only take what you need for bills