Comparison of Total Taxes Paid by Single-Member Entities

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The following table calculates the total federal taxes that will be paid by a taxpayer who operates a business with no employees, assuming net income before payroll taxes and salary of $150,000 and a salary of $75,000:

C-Corp S-Corp Sole Prop.
BUSINESS TAX CONSEQUENCES:
Net Income Before Salary and Payroll Taxes 150,000.00 150,000.00 150,000.00
Salary Expense (75,000.00) (75,000.00) -
Social Security Tax (4,650.00) (4,650.00) -
Medicare Tax (1,087.50) (1,087.50) -
Unemployment Tax (434.00) (434.00) -
Net Income 68,828.50 68,828.50 150,000.00
Corporate Tax (assume 35% tax rate) (24,089.98) - -
Cash Remaining in Entity 44,738.53 68,828.50 150,000.00
INDIVIDUAL TAX CONSEQUENCES:
Dividends Tax (assume 15% tax rate) (6,710.78) - -
Social Security Tax (4,650.00) (4,650.00) -
Medicare Tax (1,087.50) (1,087.50) -
Self-Employment Tax - - (17,260.43)
Total Income Reported on 1040 lines 7, 12 and/or 17 75,000.00 143,828.50 141,369.79
Income Tax (assume 30% tax rate) (22,500.00) (43,148.55) (42,410.94)
TOTAL TAXES PAID (FEDERAL ONLY): (64,775.75) (54,623.55) (59,671.36)
Tax Rate: 43.18% 36.41% 39.78%

User:Sterling

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