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I am working on a business plan for a small business I'm going to be starting in the near future. I am going to incorporate as an S-corp. One of the line items on the business plan I have to present to the banks soon is how much of my salary will be taken by taxes and how much of the dividends I pay myself will be taken by taxes. I'm not sure how to calculate that and I can't locate any resources online. Can somebody tell me how to calculate taxes for these items in an S-corp or where to go to get that information?

Some background information: I'm incorporating in Indiana, US.

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You may be able to find the answers to your question on the IRS web site:

http://www.irs.gov/businesses/small/article/0,,id=98263,00.html

Specifically, using this form to estimate taxes for salary:

http://www.irs.gov/pub/irs-pdf/f1120w.pdf

and this form to estimate taxes for dividends:

http://www.irs.gov/pub/irs-pdf/f1040es.pdf

  • Be careful when you start making money that you pay yourself a "reasonable" and "appropriate" salary. If your salary is say $20k, and you pay yourself $200k in dividends, the IRS will probably be unkind to you, as they will (correctly) assume that you're avoiding payroll tax. – duffbeer703 Jan 31 '11 at 0:39
  • A few examples I've seen used a 50/50 split between salary and dividends. – Sparafusile Jan 31 '11 at 13:07
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I see a lot of people making the mistake or being given bad advise in structuring a new business. If you have more than one shareholder, then by all means an S Corporation is a better structure for lower taxes; avoid double taxation. If, however, this is a one shareholder S Corp, then you had better 1099 yourself as a consultant or look into sole proprietorship. The tax benefits are much better either way. Dr. Suraiya Shaik Ali

  • This doesn't answer the OP's question at all. – davmp Jul 25 '17 at 23:12

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