<p>^It’s worth noting that at CSS schools you will also be faced with a business valuation and additional form for business or farm businesses.</p>
<p>i spoke to her tax guy today and he agrees with all of you. So my wife might be misunderstanding the way it works. She’s on a plane so I will have to wait awhile before relaying this. Thanks to all for putting up with me (us).</p>
<p>If a man is alone on a boat in the middle of the Atlantic and he says something, is he still wrong?</p>
<p>
My wife would say “yes”. :D</p>
<p>LOL!</p>
<p>findingZzero, I’m voting this thread the top one for this application season! Your cheerfulness rivals that of dumbparent from spring 2011: <a href=“http://talk.collegeconfidential.com/financial-aid-scholarships/1121952-fafsa-efc-47k.html[/url]”>http://talk.collegeconfidential.com/financial-aid-scholarships/1121952-fafsa-efc-47k.html</a> I’m sure that you will get this all sorted out soon!</p>
<p>I bow to your superior knowledge. But did ya have to name the other guy? Cheers, All</p>
<p>I think findingZzero that most people don’t understand how S corps work and just let the accountant handle it! Of course, it’s not you who’s wrong, it’s your wife ;)</p>
<p>I’m sure it’s probably my fault…somehow…</p>
<p>
</p>
<p>You are a very smart man… And have been married for a long time…</p>
<p>I own an S corp and don’t understand how you “leave money in the business”. You can reduce the salary or wage you take and that has the advantage of reducing the FICA taxes. However, as many have mentioned you must file a K-1 and that income will be added to your tax return as business income. You must pay federal income tax on that amount. You can increase some business expenses, perhaps leasing a vehicle or computer equipment and that will reduce your income (but of course increase your expenses). You might also look at ways to shelter more income into investments such as a Simple IRA. Either way you are reducing cash available. Perhaps the best advantage to reducing your income would be the tax advantage of not having to pay the 7.65% of your income to FICA and banking that amount to help pay for college. Good luck we are in the same boat. I never dreamed I’d be hoping to limit my income.</p>
<p>One clarification. If your leasing a vehicle it must be used for business purposes. I guess I was assuming that if you were going to purchase a vehicle for business purposes at some point in time anyway, now would be a good time. Non business use would be charged as income and mileage would need to be tracked. I just want to be above board here.</p>
<p>@lvvcsf - I may be mistaken, but I think you have to be careful not to reduce your salary too much. I seem to recall having to pay a penalty for having too little tax withheld one year when we had a big profit.
Perhaps someone here with accounting experience would know?</p>
<p>^^^
Yes, IRS frowns upon reducing salary to avoid paying payroll taxes. The rule of thumb is that salary has to be either commensurate with the position and industry standards or if be 70% of net profits (before the salary is taken).</p>
<p>Agreed. However there is some flexibilty. If you reduce your salary to $0 you’re definitely asking for trouble. I have always followed the 70-80% rule. Always discuss any changes with your accountant.</p>