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668b irs 2001 form

hey thanks for joining me guys my name is will Lopez I'm founder of advisor Phi comm today this video is going to cover why the escort status and how to complete form 2553 which is the IRS form to elect S corporation status federally so I get asked this question a lot by a lot of small business owners all across the country I do a lot of consulting in this area and I do a lot of guidance in this area so the common question I get is how do I save money in taxes and then how do I properly format my corporation or structure my corporation where it's beneficial to saving money in taxes and it all basically comes down to this S corp status that this term always gets kicked around so what I want to try to do is explain what the S Corp status is why I believe you should elect it if it quite a few qualify for it and then basically how to elect it which is basically form 2553 and how to complete that so what is the S corp status so the S corp status is a federal tax status that needs to be elected that the IRS allows you to elect federally so you basically fill out form 2553 the corporate the IRS processes that form and basically sends a letter to you saying that your corporation or your LLC has been qualified for S corp status LLC's Ning's can elect it so what people don't know is that LLC's default to a certain tax position and so to inks inks default to a certain tax position in that tax position is not S corp status for inks generally oils for inks it's si corpse for LLC's generally sole proprietorship if one person owns it not the default tax status for LLC's and ynx S corp status is a status that needs to be elected so the IRS by default puts you in the as far as I'm concerned the worst tax position possible and it's your job to elect otherwise and the S Club status is a way to save a bunch of money for all of us default tax status is for LLC's well if one person or one entity owns an LLC or starts an LLC in the state in your state if it's an individual as a sole proprietorship if it's another corporate raishin that formed the LLC and owns wholly owns that LLC is a disregarded entity if two or more people own an LLC it's considered a partnership of two or more corporations or other entities own an LLC it's a partnership so proprietors disregarded entities partnerships in general are subject to self-employment tax which is Social Security tax and Medicare tax and subject to the full realm of Social Security self-employment tax which is the employees portion and the employers portion which is fifteen point three percent total altogether so on $100,000 bottom line if you're an LLC being taxed as a sole proprietorship after all expenses then your tax bill at least will be fifteen thousand three hundred dollars which is what Social Security is and does and that does not take into account federal income tax state income tax if you're subject to that so you know it's a huge way to save money electing S corp status so default tax sentences for in corporations so if you form an Inc in your state the default tax status for that is C corpse also known as a double tax core double tax Corp is really popular for publicly traded companies so like Facebook Twitter Ford GM C corpse allow you to have various kinds of stock that is common stock versus preferred stock unlimited amount of shareholders so that's why our C Corp to really become popular is when you want to have more than 100 shareholders owning your corporation C Corp status is generally the way to go really popular for a lot of tech startup companies you know see corpse in Delaware see corporate REIT you if you want your Inc to be an S Corp then you have to elect otherwise C corpse obviously pay corporate tax so whatever incomes or net income the C Corp generates pays tax at the corporate level and then if the shareholder wants to kick out dividends or if the company wants pay kicks out kick out dividends the shareholders then the dividends are taxed at the dividend tax rates the benefits of being an escort is basically you don't have to pay any corporate tax right so you're not a c-corp you're not paying the corporate tax you're paying basically whatever gender whatever incomes are generated from the escort flow through the entity down to you and then you pay tax at the individual level so just like this point says it's a flow-through entity so any incomes or losses that the S corp or that your LLC taxes and a score or your Inc taxed as an S corp generates flows through that business down to the shareholder and is taxed at the shareholders marginal tax rate that applies to them any flow through income that S corp generates doesn't pay self-employment tax so that's where the savings comes from so for example if you're a LLC as a sole proprietor so being taxes as a proprietor and you have $100,000 net income after all expenses all deductions then as a sole proprietor you pay 15.3% and self-employment tax plus your federal marginal tax rates plus your state income tax but if you make that same under thousand dollars after all deductions and expenses as an S corp it flows through the S corp status down to your individual tax return and you don't pay any self-employment tax you basically save 15.3% on every dollar up to the phase-out of you know Social Security and Medicare now you can't avoid marginal or your federal income tax and you can't avoid state income tax but you can manage your self-employment taxes or your security taxes and your Medicare taxes great way to save potential or great potential saving a bunch of money there some considerations in S Corp status so I wasn't going to leave this out so some people always show the benefits but they never show kind of the the requirements of S Corp status there is a role or a guideline that the IRS says that the owner shareholder of an S Corp status must pay themselves a reasonable compensation they give some guidelines and there are some case studies as far as considered reasonable I would suggest you contact your tax pro or contact us to help you determine what's considered reasonable what reasonable compensation means is basically running payroll for yourself w-2 wages so the reason why the escorts don't pay Social Security tax or Medicare tax is because eventually you the shareholders are going to run payroll for yourself and through payroll you're going to pay Social Security and Medicare taxes S corp statuses adds more administrative costs so s corpse basically have to file its own tax return which means you're going to have a tax return prep fees for that you're gonna have to if you're going to have to pay yourself a reasonable compensation and you're going to have to run payroll for yourself and that's going to add you know another four hundred to six hundred dollars a year of administrative costs so sure it makes your business a little bit more complex in the in the administrative end so as far as I'm concerned the savings from the S Corp status far exceed the added administrative efforts or costs to have this S corp status elected so sure you pay six hundred dollars a year in payroll costs sure you pay let's say six hundred fifty to a thousand dollars a year for a tax preparation of your s corporate turn so you pay two thousand dollars a year but if you generate a hundred thousand dollar net income you elect S corp status you save fifteen point three percent on a hundred thousand you say 15 grand so you you paid two thousand dollars to save fifteen net-net out the door twelve to thirteen thousand dollar savings in your pocket for me that's a huge benefit that's a huge boon of cash flow back into the business and basically what you can what you can do with the savings sometimes I give some advice there and basically I tell my clients to either reinvest them into your business as working capital hire more employees with that savings establish an employer sponsored retirement plan so you have the the really cool option of setting up let's say a SEP IRA for yourself for a simple IRA or solo 401k or if you haven't done it at the individual level setting up a traditional IRA Roth IRA so you know a lot of opportunity to save money on taxes and then turn around and use that for your benefit you can take them as basically just additional owner distribution so if you just want to pull them as drawers and distributions to yourself that's absolutely fine I would work with your tax Perl on that and how to properly do that or you can do a whole bunch of nothing you can just sit on it and let it grow at 0.1% in your savings account that's absolutely fine so what I want to do is take some time now to show you how to complete form 2553 which is the form that needs to be completed for S corp status here so let me get my screen up and running here what I would do is go to Google and I would just type in form 2553 and what's going to happen is a couple PDF documents are going to pop up that the IRS has on their website one is the instructions for point form 2553 which you can read you know if you're having a really hard time sleeping at night I would totally recommend reading this it'll knock you right out and there's the actual application or the form to elect S Corp status so pretty much is the first link that pops up here's the form and what it looks like what I'm going to do is zoom in here a little bit so then that way we can work on this together so it's basically a two-page document that needs to be completed so I'm working on the assumption that you've that you've just started your corporation your Inc or your LLC and you need to file this form if you're late in filing this form then I would contact your pro or contact us and we can help you basically find the relief for late S corp election because what the IRS says is that you have to complete this form basically two and a half months after you want or the beginning of your corporation start date so for example if you start your corporation on January 1st then this form needs to be submitted to them by March 15th if it's not that it's kind of considered late or sometimes the IRS will let you file after the 75 date deadline but it has to be in the same year that you started your corporation if it's in the second year or third year of your when your business has been open then it's considered late and you basically have to toss inside this form some late amendment language sometimes some tax preparers like to prepare a separate legal document that gets submitted with the S corp status form or this 2553 so I'm working on the presumption here that you've just started your business then we're going to fill out this form 2553 so it's a two-page form really straightforward it's going to ask for a lot of corporate information so you have to have your corporate documents in front of you you have to have your EIN number assigned to you by the IRS in front of you and we're going to fill out the rest of this here the page one is going to ask for a lot of that corporate information a lot of information on the corporation and who owns it the IRS can contact the second page is basically going to ask for a list of the shareholders or former shareholders required to consent to the election so basically you know shareholder name address their signature date of the application how many shares or percentage-wise if you're an LLC that shareholder owns when they acquired those shares or percentages of ownership of the social security number of the shareholder and then the tap shareholders tax your end so on the first page we're just going to fill out this blank we're going to call it ABC company LLC is the name of the business the ein number is the I number to assign to you so we're going to say four six one two three four five six seven the adrene the address is going to be one two three let's say Mickey Mouse Lane they've incorporated I'm going to say this year so January 1st of 2015 I'm going to fill out the rest of this information state of incorporation once again that's your state that you formed the LLC or the Inc in so we can say Florida in my state box date only if you're making any changes name changes or address changes do you have to select this in 99% of the cases you don't have to fill the center box C is going to ask election is to be effective tax you're beginning normally I would put the start date of the corporation so if I start my corporation on 1 1 2015 I'm going to put 1 1 2015 box F basically is the tax year so if your fiscal year end if you're an odd year end or if your calendar year and this is where you're going to make that election remote for majority of us as calendar you're in so we're going to select that amongst you're going to put my information in here and a phone number for the IRS to meet reach me actually we're going to put my name and my title so I'm going to put managing member because it's now little C and then a phone number for them to reach me and then down here I'm actually going to put in managing member again as my title and when I print this form I'm going to sign it and date it on page 2 I'm going to actually put in my personal information so I'm going to put will Lopes my address whatever that may be I'm going to when I print it and when I print these documents I'm going to sign it with my actual signature and I'm actually going to put today's date which is January 27 2015 since I'm the only owner of this LLC I'm going to say I own a hundred percent of this LLC if its let's say you're a partnership with someone it's 50/50 then you would put 50 percent your shareholder information and then their shareholder information 50 percent to them data acquired I normally put or what you should put is the date of start date of the corporation so in this case its January 1st 2015 my social security number we're going to put in a fake one here and then the shareholders tax your end for everybody it's normally 1231 right if you're an individual that owns it if it's another corporation and that the corporation is a calendar year in then I would put the corporation calendar year in which is generally 1231 so this is pretty much how you fill out 2553 what I would do is fill out the information as best you can print out page 1 and 2 of this document sign page 1 and date it on page to sign the document and then you can fax it to the fax number provided to you by in the instructions for form 2553 or provided to your tax professional and they'll fax it for you and send it certified mail so if you have any questions feel free to visit us at advisor Phi com if you'd like to schedule an appointment with us to help you elect S Corp status or if you're late in electing S corp status then I would go to meet me that's o ford slash coach board select option accounting consultation the general consultation and that will schedule an hour free consultation with us and we can talk about how to save money in taxes and how to properly format your corporation alright guys take care and talk to you soon