Re:My First Year as a Freelance AI Engineer
by mhagiwara on Sunday May 03, 2020 @01:12AM
(#23056998)
I do have a CPA and we did an S-corp election for 2019 tax return. This is something I didn't get to mention in the post because we hadn't filed the tax yet.
Maybe convert it in a a future post.
I don’t think devs realize that a 1099 costs you money.
LLC can elect to be taxed as an S-Corp. Best of both worlds.
What are the distinctions?
A lot to write about, but in a nutshell:
LLC is a business entity type. S Corp is a way to be taxed.
With LLC, life is simpler (formation, filing taxes, maintenance). With S Corp, you can distribute the profit as dividend (at a lower tax rate) after paying yourself a reasonable salary.
Edit: I just noticed that you'd posted the original comment in this thread. So, LLC electing to be taxed as an S Corp means simpler filing requirements (as opposed to C Corp and the like), coupled with the ability to distribute dividends.
Switch to an s-Corp.
30% of the gross will be paid as a salary, as an employee of the s-Corp. you must pay social security, etc on that.
The other 70% can be taken as a dividend distribution As the owner of the s-corp. Thats not subject to social security, etc.
Will save you ~15% in taxes.
at your level, it’s Well worth the cost of the cpa to handle the payroll, quarterly, etc.