USA Trying to Estimate where S-Corp makes sense for me

[dcRealtor]

Just looking for any general guidance on how I can estimate where the 'break even' point would be for me switching from sole proprietor (single-member LLC) to an S-Corp and how much potential savings there are.

I'm a real estate broker, located in VA (also doing business in DC & MD) working alone.

My business has been growing fairly rapidly as I have been aggressively reinvesting in marketing and also receiving repeat and referral business in addition to new business partners with approx.:

$56k gross / $25k net - 2014
$110k gross $70k net - 2015
$150k gross - $100k net in 2016 projected
$220k gross - $150k net in 2017 projected

So currently I'm single, 0 dependents taking standard deduction I figure using Intuit's tax caster the way I am set up as a Single-Member LLC in VA:

$100,000 pre-tax net
$30,579 federal taxes (30.58%)
$5,492 state taxes (5.5%)
$36,071 combined taxes (36.08%)
$63,929 after-tax income

And for 2017

$150,000 pre-tax net
$48,279 federal taxes (32.19%)
$8,367 state taxes (5.6%)
$56,646 combined taxes (37.79%)
$93,354 after-tax income



So I'm guessing it is far too late for me to elect to be treated as an S-Corp for 2016? Or is it? So here is what I *think* it looks like if I understand this correctly, let's consider if my business repeats $100k net and goes to projected $150k net as S-Corp:

$100,000 pre-tax net
$50,000 salary
$50,000 dividend distribution

$12,029 federal taxes on salary (24.06%)
$7,500 federal taxes on dividends (15%)
$19,529 combined federal taxes

$16,542 federal tax savings

$150,000 pre-tax net
$75,000 salary
$75,000 dividend distribution

$21,247 federal taxes on salary (28.33%)
$11,250 federal taxes on dividends (15%)
$32,497 combined federal taxes

$24,149 tax savings


So then there a few lingering questions:

1. Do I save on state taxes too or do they remain the same?

2. What would an average cost to pay for keeping books and filing taxes for someone like me be? I have about 30 vendors and about 80% of my transactions are simply automatic recurring charges to my business credit card which keeps things fairly simple.

3. Do I have a good handle on how this works or am I way off?

4. Is it too late for me to be treated as S-corp for 2016?

6. Would any other options like a c-corp make more sense? I generally hear S-corp is the way to go for someone such as myself.

 

[DTA93433]

1. You will save on State taxes too.
2. I normally charge $75/hr. for my clients for bookkeeping services.
3. You are "off' somewhat on your calculations. Very simply put if a "member" has basis (equity interest) in an s-corp and is taking out a "reasonable" salary; dividend distributions are non-taxable.
4. No. The law states than an s-corp election must be made by the 15th day of the 2nd month following it's inception (IRS Proc: 2003-43 ). Another option is (IRS Proc. 2007-62) which allows you to file an election with your 1st filing of Form 1120S (income tax return for an s-corp). Both IRS regs require the filing of Form 2553 (S-Corp Election by a Small Business)
5.(6.) An election as a C-corp would not be recommended due to "double-taxation" of it's profits by both the corporation and it's shareholders.

I have a spreadsheet (see attached) that shows the tax savings involved in the 1st $50k in sales.