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February 7, 2025
Question

Paying service fees to my S Corp?

  • February 7, 2025
  • 1 reply
  • 0 views
  • I would like to save on self-employment taxes.

 

I am a board advisor and receive direct payments in my name. I file as a sole proprietor because the companies I work with are not willing to pay an S or C corp directly. Can I create an S corp that I pay a service fee to, and that S corp pays me reasonable compensation as a w2 employee?  For the tax professionals, have you seen this legitimately done without violating any irs laws?

 

Here is an example:

- I get paid $300K per year as a 1099 NEC

- I pay an S Corp $75K in service fees

- The S Corp pays me $30K salary through a W2.

- I receive $45K in dividends from the S Corp 

 

1 reply

February 7, 2025

If the only reason you are setting up the S corporation is to shelter tax dollars, then the IRS will likely not allow it. You would need a legitimate business purpose for the corporation.

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