How to filter 1099 income into S-Corp & avoid 15% SE tax?

Question

I'm currently being paid as a 1099 wage earner and I also own an S-Corp. The company who pays me the 1099 income is not able to pay the S-Corp directly because they pay with a pay card from Bank of America, and BofA only issues paycards to people with social security numbers.

Since my S-Corp has no social security card, it can't get a paycard and hence can't be paid directly.

My question is how can I get the 1099 income into the S-Corp without having to show I've personally earned 1099 income? I want to make it so my S-Corp has earned the money, not me. I want to avoid the 15% self-employment tax.

Thanks

Answer 1

Great idea, only it won't work. An S-corp is a pass-through entity, and you are required to pay yourself something, anyway. Only way to lower your tax is to put some $$ into an IRA, SEP, 401(k) or another qualified retirement plan. That might help. Also, since you can file as self-employed, remember that there are deductions that apply that wouldn't apply otherwise. Take every last friggin' one of 'em.
As far as being paid directly, and the paycard: why is it that they have to put it on a card, and can't put it directly in your account? Sounds to me like your S-Corp doesn't even have a bsic checking or savings account, which is a little scary, frankly. You shouldn't be dealing with a paycard. You should have direct deposit, which Bank of America can indeed deposit to. They just don't issue their paycards to corporate TIN's, for various reasons, one being that you should have an account and be paying yourself out of it, and they'd like to open the account for you.
Good luck, and this might be the year to seek professional help with your tax return!

Answer 2

File a Schedule C with you tax return showing the 1099 income, and show the exact same amount as an expense to your S corp, make sure you give your S corp a 1099.

I'm not sure that you can do what you are proposing. You are suposed to pay your self a resonable salary from the S corp, this means something simular to what other people in you occupation earn, this would include people claiming income on Sch C or W2. Example; carpenters in you area earn $40,000 but you pay yourself $10,000 and claim the other $30,000 as passive income on Schedule E; would probably be an audit looking to happen.

The only way I know to bybass social security taxes is to be a passave investor, it would be hard to do that if you own the company and work there.

Answer 3

You can't do that. Sorry.

Your income from the S-Corp flows directly to your Form 1040 return. You have to pay SE tax on it there. So, even if you pass it through the S-Corp, you STILL have to pay the SE taxes on it.

If you roll the money into the S-Corp and pay yourself an equivalent salary, you'll actually pay MORE in total taxes than if you just let it flow to your Form 1040. That's because the SE tax is 15.3% of 92.35% of the income while if it's taken as payroll taxes it's on 100%.

Also, the money paid to you by the S-Corp as salary is subject to state and federal unemployment taxes as well, while if it goes to your 1040 and Schedule SE there is no unemployment tax. Of course, if you should become unemployed, you'd be covered by unemployment insurance if your wages passed through the S-Corp. You'll have to decide which is worth more to you -- having the unemployment coverage or paying less tax.

Answer 4

I'm not following why they can't pay your s-corp. But, there's another catch. being a corporation, it takes someone to operate it. That sounds like you to me and the reasonable salary payable would be yours and subject to FICA.