Head is spinning - S-Corp for taxes? or Just keep doing 1099 for myself?

Manchester, New Hampshire
Personal Finance
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Head is spinning - S-Corp for taxes? or Just keep doing 1099 for myself?

Nick Ponte
Member since 2021 · 5 posts · 2 votes

Last few years have been making $250k as a Realtor. I fired my last accountant as he made some errors as well as gave poor advice. I hired a new CPA and he told me to create an LLC as my name, open business checking account, and elect to be taxed as an S-Corp. I have a family friend who was just on the phone with his CPA, so he asked him, and he said there is no benefit to S-corp, and that it just doubles the work for the CPA (and their costs), doubles the work for myself, and there really is no benefit to it. I don't know who is right and what I should do.

Additionally, for the foreseeable future any money I make, I need to collect asap as I recently took out a line of credit to build a home (long story), so basically I can't really have any funds sitting in an account for a while. The other CPA (not my new one, friends CPA) stated all funds have to be taken at the end of the year anyways?

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Jeff Nash
Accountant · McKinney, TX · Member since 2023 · 394 posts · 580 votes
2y

The other respondents provided some good considerations.  The issue of paying an entity versus an individual is an issue in various states.  Texas just changed this rule effective 1/1/2024 to allow agents rather than only brokers to be paid through an entity in consideration of the S-Corp election.  I think you should analyze your situation as I normally suggest if net profit is consistently greater than $40-50k the benefit probably outweighs the cost (additional tax return, payroll, etc).  Everyone’s goals and situation is different so working with someone is important. 

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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    2y

    There potentially are some benefits with having an S-Corp set up.

    There are a couple of hurdles you may have to jump through.
    The commission check would likely have to be paid to said LLC.
    Therefore, the question is within your state, are LLC's eligible to hold a realtor / agent license?

    Yes, it is true that there is added for as there is additional forms that needed to be completed - S-Corp return and payroll filings. However, there would potentially be some savings.

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  • Sean O'KeefePro Member
    CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 871 votes
    2y
    Quote from @Nick Ponte:

    Last few years have been making $250k as a Realtor. I fired my last accountant as he made some errors as well as gave poor advice. I hired a new CPA and he told me to create an LLC as my name, open business checking account, and elect to be taxed as an S-Corp. I have a family friend who was just on the phone with his CPA, so he asked him, and he said there is no benefit to S-corp, and that it just doubles the work for the CPA (and their costs), doubles the work for myself, and there really is no benefit to it. I don't know who is right and what I should do.

    Additionally, for the foreseeable future any money I make, I need to collect asap as I recently took out a line of credit to build a home (long story), so basically I can't really have any funds sitting in an account for a while. The other CPA (not my new one, friends CPA) stated all funds have to be taken at the end of the year anyways?

    @Nick Ponte "he said there is no benefit to S-corp"

    This is incorrect. Generally, S-Corps can help flippers, real estate agents, and other self-employed people avoid self-employment taxes (15.3%) that may be paid if you were structured differently.  

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    *This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.

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  • Jeff Nash
    Accountant · McKinney, TX · Member since 2023 · 394 posts · 580 votes
    2y

    The other respondents provided some good considerations.  The issue of paying an entity versus an individual is an issue in various states.  Texas just changed this rule effective 1/1/2024 to allow agents rather than only brokers to be paid through an entity in consideration of the S-Corp election.  I think you should analyze your situation as I normally suggest if net profit is consistently greater than $40-50k the benefit probably outweighs the cost (additional tax return, payroll, etc).  Everyone’s goals and situation is different so working with someone is important. 

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