Cash flow - my old post got deleted??? - Spidell

Cash flow – my old post got deleted???

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Message Board Cash flow – my old post got deleted???

This topic contains 2 replies, has 3 voices, and was last updated by Peter Muffoletto 2 months ago.

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  • #161275

    If a C Corp pays the sole shareholder via 1099 versus W2, why is the total tax liability MORE as a W-2? The increase in the tax liability is equal to about 1/2 of the employer share of the payroll tax should the shareholder be paid as a W2.

    I did advise the client that  paying via 1099 is not the correct way to pay…but i just need to understand why the W2 amounts to more tax!

  • #161287
    William Dewberry

    To answer your question, prepare two versions of a tax return, using the same gross $$ amount, 1 in W2 form, 1 in SCH C form, then compute total tax including self employment tax , compare the total $$$.

  • #161300
    Peter Muffoletto

    If i understand your question the difference making the 1099 avenue resulting in a higher corporate tax is that the entity is not incurring the payroll taxes.

    There should be no instance in which a wage was paid instead of by a 1099 that the profits would be higher due to the incurance of the payroll taxes which are deductible by the corporation.

    As to the the amount going up, it would appear that there is a math issue somewhere.