Dan wrote:
Calif Bill wrote:

"Dan" wrote in message
...

Animal05 wrote:


Dan wrote:


Short Wave Sportfishing wrote:


On Fri, 12 Jan 2007 03:51:25 GMT, "Mike" wrote:



Funny how big business works. In my small business, I'm the LAST
one to get paid.





I've been working with a guy I've known for years - he started up a
mechanical engineering/machine shop that does custom fittings and
highly specialized machined parts for all kinds of industries. He
has
some metallurgical expertise that's hard to find and some machinists
who are absolute geniuses with a CNC machine.

He pays himself $1 more than the highest paid employee he has.




The problem is that he is the business owner. I could pay myself
$8.00 and hour but, at the end of the year, my personal income tax
bill would be well over $100K if I took my profit as retained
earnings. He's probably an S-corp, too so if he's profitable, the
money has to go somewhere.


There is a simple reason for this.

Wages are subject to FICA taxes up to around 95k a year, and there
is no limit to the Medicare Tax.

By taking a reasonable wage, and then taking the rest of business
profits as dividends, you legally avoid paying the addiontal taxes.



True, but then I would have to live on under $95K throughout the year
and take he rest as income in a lump sum.

--
Posted via a free Usenet account from http://www.teranews.com



quarterly dividends.


Still taxable income.


But it is not wages subject to the FICA taxes. You save a little over
15% for the difference between what you take in wages and 95k, then a
little over 2% afrer that.

Lets say you take 50k in wages and another 75 in dividends.
You would save more than $6750 for the income up to 95k and then around
$700 for the rest. (You do lose the 50% deduct for the fica taxes paid
though :-) )