Freelance work: S Corp

Question

I heard you pay higher taxes as an S corp. When is it worth filing as an S corp as a freelancer? If both spouses married filed jointly are freelancers should you make a joint S corp? They do different work.

JanaA · Answer

Yes, there are advantages and disadvantages to having an S-corp. If your income is inconsistent, it is likely that filing a Schedule C may be the best option to report your income depending on your situation.

#kpook · Answer

Thank you very much.  Seems like it may be risky to S-corp with inconsistent income.

KeriC · Answer

One of the advantages of an S-corp is that you pay yourself wages as an employee and can avoid self-employment tax on any additional profits that you take from your business. That being said, there are some additional requirements with an S-corp that are different from a sole proprietorship. Here are some of the basic differences.

* As an S-corp, you will have to file your business return on Form 1120-S, which typically comes at a higher cost to file (often with a paid tax preparer) instead of simply including your income on a Schedule C.
* As an S-corp, you will need to pay yourself a reasonable wage and file quarterly withholding tax returns with the IRS and your state.

An S-corp generally only includes income from one type of business and not multiple different types of business income. An S-corp can be the parent of multiple single-member LLCs, but that would require additional legal groundwork. If you wish to go that route, I recommend consulting a local tax advisor.