Let’s treat this like a quiz question. If you are an entrepreneur and you write your...
Let’s treat this like a quiz question. If you are an entrepreneur and you write yourself a payroll check for $100, what do payroll taxes cost you? It’s all your money after all, whether its inside your company or your personal checking account. What percentage do the taxes cost you?
?a) 20% – 30% b) 30% – 40% c) 40% – 50% d) 50% – 60%
?Most clients will say around 30%. But the correct answer, in the lower W-2 brackets is D…50% to 60%. Please allow me to explain.
?All of this depends on your filing status and how many exemptions you have. But generally Gordie Howe Jersey , if you write yourself a check for $100 in salary, you will end up with about $69. But before the social security and medicare taxes are deposited into the IRS, they must be doubled which is an additional 7.65%. Also, you have unemployment taxes on top of the payroll which depending on your circumstance average somewhere around 4% Detroit Red Wings Jersey , So for every $100 that you pay yourself it costs you $111.
?Most things in accounting only make sense when you look at them backwards, so here goes…
?You pay yourself $100. You get $69, but it costs you $111. In other words you spend $42 in tax for every $69 that you receive. That isn’t a 30% tax. It’s a 60% tax. Certainly the unemployment taxes vanish after $12,900 in compensation. But no matter how you look at it Tyler Seguin Jersey , this is not a 30% tax.
?Why can’t entrepreneurs afford to make their payroll tax deposits? Because they are just too expensive.
?What can you do to remedy this problem? Change how you are taking money out of your business.
?The Five Legal Ways to Take Money Out Of A Business Are
?1) W-2 Salary
2) Reimbursements
3) Rent
4) Interest
5) Dividends, Distributions, and Draws
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We already know that taking money out as a W-2 is one of the most expensive ways to do it. I’m certainly not saying that you can get away without paying payroll taxes in an active trade or business. There are a couple of instances where you can, but for the most part Jamie Benn Jersey , you cannot. The point is that if the correct tax planning is put into place, you don’t have to pay these excessive taxes on all of your compensation. You can take a reasonable W-2, a reasonable rent on the physical premises, and a reasonable interest on your shareholder loan. Rents and interest are passive forms of income and are not subject to payroll taxes.
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Dividends Dallas Stars Jersey , distributions, and draws are another way to legally take money out of your enterprise. Which one you take, has everything to do with the type of entity that you have. You may choose to get out of your sole proprietorship or partnership just so that you can take a distribution which isn’t subject to payroll taxes. But this is a matter of planning. These solutions don’t just present themselves. They are a matter serious thought and planning.
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If you have problems in this regard or would like a complimentary tax planning session, please don’t hesitate to contact us.
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Additional accounting articles or information can be found at…
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When you go on holiday Sergei Bobrovsky Jersey , getting the right kind of accommodation is an important part of it. You have to stay within budget, but you want to be comfortable too. So what kind of holiday accommodation does Merimbula offer? The choices in this lovely town on the south coast of Australia are many. There are the usual hotels and motels that many towns offer, but you might want something a little different if you are staying for one or more weeks.
Many people choose the caravan parks as an affordable accommodation and this provides a reasonably safe area for the children to run about and let off steam. In addition, they usually have a park area and a swimming pool for their patrons to enjoy. However Artemi Panarin Jersey , it is not the only choice that is available and some people might like more comfort and space.
If you have a pet then you will want to ensure that your accommodation is pet friendly, so you will need to ask before you book, no matter what kind of accommodation you choose. Houses and cottages may allow pets, and some caravan parks also accept dogs as long as they are kept on a leash. Certain hotels may offer pet accommodation at extra cost Seth Jones Jersey , but the pet is not allowed into your room.
The choice for holiday rentals at Merimbula includes bed and breakfast as well as units and cottages. People who are only intending to stay for a night or two may find that the former is a good choice. B&B rooms are usually quite spacious and beautifully decorated, and you get to talk to a local who can tell you about many attractions in the area that may not be included in brochures.
Merimbula holiday apartments also suit a lot of holidaymakers as there is plenty of room and all the comforts and amenities of home. You can save by cooking some of your own meals; most have laundry facilities and if the weather happens to be wet there is plenty of room indoors for the children to watch a movie.
So you can see that the choice is wide and it is up to you to choose the kind of accommodation that suits your lifestyle and budget. Some people quite enjoy roughing it when they go on holidays, while others prefer to have more comfort or even luxury. Where you stay is almost as important as what you do, so choose wisely.
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