Real Estate Agents - How much Social Security Tax?

Author

How much Social Security Tax?

abhijitdey@gmail.com

2006-04-14, 8:21 pm

My wife has started as a realtor a while ago and recently some of her
deals have started closing. She is with Coldwell Banker, and is
operating through a S. Corp (she is the sole owner). CB pays the
commissions to the corp. She would (of course) want to write herself a
few checks every now and then, and the question is how to handle the
tax? This being a S. Corp, at the end of the year, all earnings are
taxable on our joint tax return, whether taken out of the S. Corp. or
not.

Can she write out a reasonable amount (say somewhere around 50+ % as
"salary") to herself and declare rest of it as "dividend". If this is
"normal practice", the "dividend" part would escape the social security
tax - quite a savings.

Okay - now I personally know this can be done. I have used a S. Corp (a
different one) myself for my software consulting work, and have done
exactly the above, paying about 70% or so to myself as a "salary", rest
"dividend". No problem. I just don't know how this works with realtors.

Appreciate any advice if any of you have been in asimilar situation
yourself. Thanks.

darrenli516@yahoo.com

2006-04-17, 3:21 pm

I am not sure your wife is doing the correct thing with an S Corp.
As a real estate agent, her income is reported on a 1099 form.
All of this income is reported to the IRS, and is taxable at the
appropriate rates.
You wife earned the income and is thus responsible for it's taxes.
I am not a lawyer, but I'd like to know who advised your wife to do
this.
I've never heard of any real estate agent doing this. And I doubt the
IRS would approve of it or sanction it. S Corps serve a very specific
purpose, and I don't think that his is it.
Make sure your wife is getting good legal advice.

Darren

agsf_57@yahoo.com

2006-04-18, 5:21 am

abhijitdey@gmail.com wrote:
> My wife has started as a realtor a while ago and recently some of her
> deals have started closing. She is with Coldwell Banker, and is
> operating through a S. Corp (she is the sole owner). CB pays the
> commissions to the corp. She would (of course) want to write herself a
> few checks every now and then, and the question is how to handle the
> tax?

Smart wife (if done right).

> This being a S. Corp, at the end of the year, all earnings are
> taxable on our joint tax return, whether taken out of the S. Corp. or
> not.

I'm not a lawyer or a CPA, but I believe you are wrong. Keep in mind
that the S-corp is a separate entity (assuming you respect the
viel).The S-corp is taxed differently and is independant of your joint
filings.

>
> Can she write out a reasonable amount (say somewhere around 50+ % as
> "salary") to herself and declare rest of it as "dividend". If this is
> "normal practice", the "dividend" part would escape the social security
> tax - quite a savings.

As long as all shareholders are paid a dividend based on their shares
at the same time, then what you state is correct. Also, keep in mind
that the salary you pay yourself has to be of market value. In other
words, you cannot say you're computer programmer but pay yourself a
salary of 12k/yr when your corp made over 250k/yr.

> Okay - now I personally know this can be done. I have used a S. Corp (a
> different one) myself for my software consulting work, and have done
> exactly the above, paying about 70% or so to myself as a "salary", rest
> "dividend". No problem. I just don't know how this works with realtors.

S-corp is a S-corp regardless of it's business model.

> Appreciate any advice if any of you have been in asimilar situation
> yourself. Thanks.

Make sure all agreements between CB is under the S-corp and not her. I
would also suggest putting her car under the S-corp in case if she's
ever in an accident, they can't go after the house that's under your
names. It is also very important that you respect the corporate viel
just in case if you're ever sued.

Again, I am not a lawyer or a CPA (nor do I play one on TV), so I
suggest you research more into this.

Regards...

Steve Foley

2006-04-18, 9:21 am

<agsf_57@yahoo.com> wrote in message
news:1145348004.006670.142450@z34g2000cwc.googlegroups.com...

> I would also suggest putting her car under the S-corp in case if she's
> ever in an accident, they can't go after the house that's under your
> names. It is also very important that you respect the corporate viel
> just in case if you're ever sued.

I believe in the case of an automobile accident, the injured party could sue
both the driver (wife) and the automobile owner (S-Corp), and go after the
driver's assets as well as the owner's assets.

I think the S-Corp saves your hide when someone else is driving.

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