This tax tip applies to folks who have enough control of their income to make a decision on how it flows. S Corp owners or the like may find this tip interesting, again we are not recommending, only REMINDING ! See your tax professional for your specific situation.
Bonus Via W-2 or K1
Depending on your situation, you may find it better to have left over income for the year be paid out via your corporation or other entity as non-W-2 income or net income to the corporation. See example below…
This MAY avoid some tax burden, but this technique should not be abused as the IRS may frown heavily on abuse.
Here is a good example: Owner/Employee takes a salary though out the year and funds are left over at the end of the year. Before just taking a salaried bonus, check with your tax professional on what options you may have.
Again, REMINDER, not recommendation… never get in the gray on taxes, however there are no gains to be had by paying more taxes than you would otherwise need or better said by Judge Learned Hand:
Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.
Hope you have enjoyed our Year End Tax tips, if you have missed any, just go here for a complete, concise list!
Have a great “Well tax arranged” Day!
John A. Kvale CFA, CFP