How Do I Stop Overpaying Taxes?

The tax math might look simple, but the decision isn't. S-Corp election can save on self-employment taxes when net profit exceeds $40K-$60K, but it also creates ongoing compliance requirements and can complicate future planning, including exit strategies, equity transfers, and retirement plan options. We see too many businesses elect S-Corp status without understanding the long-term implications, and too many who later have to revoke it. This decision deserves proper analysis, not a quick calculation.

Reasonable salary is what you'd pay someone to do your job in your industry and location. The IRS looks at comparable wages for similar roles. Too low triggers scrutiny, too high means overpaying payroll taxes. This isn't something to guess at. Our monthly subscription includes a compensation study that analyzes your specific role, industry, and geography to determine a defensible salary that optimizes your tax position.

Several options, each with different limits: SEP IRA (up to 25% of compensation, max ~$69K), Solo 401(k) (up to $23K employee + 25% employer, max ~$69K), and Defined Benefit Plans (potentially $200K+ for older owners). The right choice depends on your income, age, and whether you have employees.

Tax planning should happen year-round, not just at year-end. Ongoing planning means no surprises, better cash flow management, and the ability to properly allocate capital as opportunities arise. Waiting until Q4 limits your options. By April, most opportunities are gone entirely. The best approach is quarterly check-ins with real-time visibility into your tax position.

Most accountants are great at compliance and filing accurate returns on time. Tax strategy is different. It's proactive planning to minimize your tax burden legally. Many accountants don't do strategy, or don't have time for it. Ask yours what tax planning opportunities you might be missing. If they can't answer specifically, you may need a strategic advisor.