Episode 37. Owner Payroll Tax

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If you’re a small business owner with an S Corporation, the way you pay yourself can make or break your tax bill. Most business owners overpay payroll taxes because no one ever showed them the right tax strategy. They treat owner payroll like a checkbox which is a big mistake. Your payroll is a tax planning weapon if you know how to use it.

In this podcast, I’m breaking down exactly how to pay yourself as a business owner, how payroll taxes really work inside an S Corporation, and what you need to do right now to lower your self-employment tax legally. These tax strategies are what your CPA probably isn’t telling you.

We’ll cover payroll tax strategy, how to determine a reasonable salary, and how to avoid red flags with the IRS. If you're married and running a business, there are major tax benefits to putting your spouse on payroll. Get this wrong, and you’re either wasting money or triggering problems with IRS payroll compliance. Get it right, and you unlock additional tax deductions, retirement contributions, and even better healthcare options.

And if you’re listening to this before year-end, I’ll walk you through key tax planning tips you need to make before December 31st. Because once the calendar flips, your options disappear and your tax bill is locked in. This is the payroll tax strategy every small business owner needs to understand. If you're serious about reducing payroll tax, increasing your tax deductions, and staying IRS-compliant,  start by listening to this podcast.

I've put together this FREE resource for you:

7 Write-Offs Every S-Corporation Business Owner MUST Know
🆓 Download FREE PDF here: https://7taxwriteoffs.com/?el=podcast&htrafficsource=buzzsprout

Ready to start saving money on your taxes?
☎️ Schedule your FREE Tax Advisory Session: https://taxplanningcall.com/?el=podcast&htrafficsource=buzzsprout

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🤑 If you want a better payroll app to process and file payroll for your business. Check out Gusto, so easy to use and you get a $100 gift card for signing up using this link: https://gusto.com/r/boris466

P.S. When you sign up for Gusto, you get a $100 Visa gift card

*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this ...

Episode Transcript

Speaker 1 (00:00):
Hey, if you are a business owner and you run
payroll for yourself or for youremployees, then this is for you
.
Okay, now I'm going to breakdown this into four sections to
help you understand how payrolltaxes work in your business and
how you can actually utilizesome of the strategies to reduce
down your payroll taxes.
So, like I said, I want tobreak down this into four

(00:22):
sections.
First thing I want to talkabout is how payroll taxes work.
It's really important for youto understand this.
If you already know how payrolltaxes work, just skip through
it.
But payroll tax is really,really important.
That's the first thing.
The second thing I want to talkto you about are owner payroll
taxes.
Now that we understand payrolltaxes, what about payroll taxes
for yourself as an owner, onyour paycheck and some of the

(00:44):
strategies that you can use tolower that?
The third thing spouse.
If you are employing yourspouse in your business, how
much payroll tax are you payingfor them and how can we lower
that or really eliminate that?
So that's what we're going totalk about as well, and some
year-end cool tax strategies,tax tips, whatever you want to
call it.

(01:04):
We're definitely going to coverthat.

Speaker 2 (01:06):
Welcome to the Tax Reduction Podcast for
money-making entrepreneurs withBoris Mushaev.
Boris has helped entrepreneursacross the United States
collectively save millions ofdollars in taxes with the power
of tax planning and advisory.
The only way you, the businessowner, can save money on taxes
is by using proactive taxstrategies, and this podcast is

(01:27):
all about saving you money ontaxes.
Boris will share with youin-depth and easy-to-understand
tax reduction strategies thatyou can implement in your
business within 30 days or less.
Let's jump into today's episode.

Speaker 1 (01:40):
Now let's cover the first thing on our list, which
are payroll taxes, and how dothey work.
Now, it's very, very importantto understand that you, as an
owner, pay payroll taxes.
Now the best way to put it isthese payroll taxes are broken
down into Social Security taxes,medicare taxes.
You also pay what's calledState Unemployment Insurance in

(02:02):
most states and FUTA, federalunemployment.
So Social Security and Medicareare 7.65%.
Everything else makes up thedifference.
So, whatever it is, I like tostop at a general number of 10%.
So for every $100 that you payin payroll, whether to yourself
or to your employees, youbasically pay $10 in taxes.

(02:25):
So again, every $100, $10,every $1,000, that is $100 in
payroll taxes.
That is an additional expenseon top of the payroll.
Now, this is not an income tax,because you already have an
income tax, you already have astate tax.
This is a payroll tax.
That is why I always say it issuper essential for you to get a

(02:46):
tax advisor.
If you do not have a taxadvisor, you are overpaying in
taxes.
So, if you have a profitablebusiness, speak to your tax
advisor.
How to lower your payroll taxesand some of the strategies
which we're going to talk abouthere.
All right, let's move on to thesecond part, which is owner
payroll strategy.
So for our tax advisory clients, everybody in the firm and for

(03:08):
my own firm really, I use Gusto.
Gusto is a payroll company.
I personally don't likepaychecks, adp or any of that
stuff.
Some clients have QuickBooksOnline payroll, which I'm okay
with, but we really put a lot ofclients on Gusto because it is
so easy to use.
If you are interested insigning up for Gusto, I do have
an affiliate link below.
I think you get like $100 forsigning up.

(03:28):
Really cool company and reallycool app and we use it
personally because it makes itso much easier for us when we're
implementing some of thestrategies to basically
implement it on that app.
So how can we lower yourpayroll taxes as an owner of
your own business?
The first thing you want toconsider is lowering your own
salary, especially if you'rerunning an S corporation.

(03:50):
So if you've got an Scorporation, irs says, hey, you
don't have to pay yourself ahigh salary, you have to pay
yourself a reasonable salary.
So a lot of business ownersoverpay in payroll taxes because
, remember, payroll tax is whatyou pay as a business, which we
already said about 10%, but you,as an employee, pay more
payroll taxes, right, which isSocial Security, medicare tax.

(04:11):
That is 7.65% Altogether.
That's about 18% of payroll taxthat you are paying as an owner
on your own paycheck.
There's a couple of ways youcan reduce it.
Number one like I said, you canlower your salary to a
reasonable amount.
The second thing is that if youpay for health insurance for
yourself, your spouse and yourkids, you can actually include

(04:34):
it as part of your W-2 wages,but also it will reduce your
taxable social security andMedicare wages.
So basically, it's going toreduce your payroll taxes.
A lot of accountants, forwhatever reason, do not use this
strategy for their clients.
So I like to call it 2%shareholder health insurance

(04:57):
strategy, because if you aremore than 2% owner of your own
S-corporation, you can reducedown not only your taxable wages
, but you also reduce down yoursocial security Medicare wages.
That is like 18% in tax savings, because it reduces entire
social security Medicare wages.
So 18% of your payroll taxeswill be reduced by basically

(05:20):
including your health insurancepremiums on your paycheck.
So that's a cool trick andthat's why I like working with
Gusto, because it makes it somuch easier to implement.
Check off, a couple of boxes,done deal.
Now, another thing I want totouch upon for owner payroll if
you set up a 401k for yourselfwhether it's a regular 401k or a
solo 401k you can withhold thedistributions, right, the

(05:44):
deferrals, so to speak.
Excuse me, not thedistributions, the contributions
.
Okay, you can withhold thecontributions from your paycheck
and then submit it to thefinancial institution that you
have that handles your 401k.
But the bad news is that thosecontributions that you make into
the 401k do not reduce downyour payroll taxes.

(06:05):
So it's really important tounderstand you are saving on
income taxes, but you're notsaving on payroll taxes.
That's why we use some otherstrategies, such as the health
insurance and lowering yoursalary to reduce down the
payroll tax.
So those are a couple of thingsthat you can use in your
payroll right away.
Speak to your accountant and belike hey, are you implementing
the 2% health insurance for me?
If the accountant says no, justfire them.

(06:27):
Get yourself a tax advisor,especially if you have a
profitable business.
The only way you, as a businessowner, can really save money on
taxes and I do this for a lotof clients we save our clients
hundreds of thousands of dollarswas just doing tax planning,
because we are tax advisors.
That is what we specialize in,so make sure you get yourself a
tax advisor as well.

(06:47):
All right, the third thing thatwe're going to talk about
should you pay your spouse asalary, and we'll talk about it

(07:12):
right after this break everyS-corporation business owner
must know.

Speaker 2 (07:16):
In this PDF you can find seven tax strategies that
you can start using in yourbusiness to instantly start
saving money on taxes.
Click on the link in thedescription below for a free
download.
Okay, cool.

Speaker 1 (07:27):
Welcome back.
Let's talk about hiring yourspouse.
So I've heard it all frombusiness owners that say, hey,
boris, like well, I tell them,like take your spouse off
payroll.
Like your spouse doesn't work,why do you put them on payroll?
Or like if the spouse works,they pay them like two hundred
thousand, three hundred thousanddollar salary or a hundred
thousand dollars.
I'm like why does your spouseget paid so much?

(07:48):
And that the spouse gets upsetat me, like what are you talking
about?
What do you mean?
I get paid so much.
But I'm like relax, I just wantto talk strategy, okay.
So a lot of times what I'veencountered excuse me, with
business owners is that thespouse doesn't really do like
major executive work, right,they're really helping on a back
end with a lot of operations,maybe clerical work,

(08:10):
administrative work, whateverthat may be.
The salary for that position ismuch lower on the market than
what you pay your spouse.
So I tell my clients, why don'tyou lower that salary?
You can lower it.
Because I want you to save onthe payroll taxes, because,
remember, between payingyourself or your spouse and
paying a payroll tax, that's 18%.
We want to be able to lowerthat number, right, and remember

(08:33):
, the 18% is, like I said, inthe calculation that we talked
about earlier.
But we want to lower thatnumber.
So if your spouse is gettingoverpaid in your business's
salary, number one, you canlower that.
You can lower that even more if, again, you have a family
health insurance.
So that's one strategy that Iuse with a spouse.

(08:53):
But people tell me, boris, Iwant to put my spouse on payroll
because I want to contribute totheir 401k, and I say, okay,
that makes sense, right, theyespecially do that when spouse
doesn't work for the business.
I'm like, okay, I understandwhy you want to do it, that
makes sense as of why you wantto do it.
But let's talk math.
You are an effective bracket of25%.

(09:15):
That means for every money, forevery dollar you're going to
put away into 401k, you're goingto save about 25% on that
dollar.
Okay, so you put away $100,you're going to save 25.
You're going to save about 25%on that dollar.
Okay, so you put away $100,you're going to save 25.
But when you pay your spouse aW-2 wage, you pay 18% in payroll
taxes.
So let's say you pay yourspouse what you put into their
401k, whatever $25,000, $30,000,whatever that may be the net

(09:42):
savings are only 7%.
So you're really saving 7% andwhen your spouse is going to
retire, take that money out,they're going to pay taxes on
that at more than 7%.
So these are the things, theepiphany moments that my clients
have, like the light bulb goesoff, like, oh, but my financial
advisor right, so anyways.
So please, if you want toemploy your spouse in your
business, speak to your taxadvisor.

(10:04):
Come up with a strategy to doit.
And again, we love to use GustoPayroll because it helps us
simplify a lot of things,including adding employee or
taking off employee.
I do have an affiliate linkbelow.
You get $100 for signing up, sogo ahead and check that out.
All right, that's the thirdthing.
Let's talk about the fourththing.
I don't know why I did that.
That's a funny gesture.

(10:25):
Anyways, let's talk about thefourth thing year-end payroll.
So this is actually reallyreally cool.
So if you run payroll I don'tknow like some business owners
run it on a weekly schedule.
Some run it on a bi-weekly,bi-monthly, whatever that may be
.
But if year-end is coming up,let's say it is December 31st
and your pay period ended.
I don't know.

(10:45):
Let's say your pay period endedon December 31st or December
27th, but your pay date, the daythat you're going to pay your
employees, could be January 2nd,january 3rd, whatever that may
be.
If that's the case, and if youare cash basis taxpayer which
probably you are, because a lotof small business owners are
then the deduction is going tobe next year, and if you want to

(11:06):
accelerate that deduction, thenchange the pay date to December
31st.
I personally do this in my ownbusiness.
I think our pay date is on the5th of a new month and our pay
period ends on like the 31st orthe 30th.
So at the end of the year Ijust make sure that the pay date
is also on the same day the payperiod ends.
I get a nice payroll deductionin that same year.

(11:31):
Now again, your deduction maycome this year rather than next
year.
You may be like well, boris, Imissed the deduction for next
year.
Well, not really, if you do theexact same thing.
So it's a cool strategy.
You don't have to use it.
I use it for myself, I use itfor some of my clients.
They love it, especially whenwe're trying to bring the income

(11:51):
down certain thresholds toqualify for other things.
So this is a great tax strategy.
Anyways, I hope this washelpful.
Thank you and until the nexttime.

Speaker 2 (11:56):
That's it for today's episode.
Be sure to check out thedescription below for some free
tax reduction resources thatBoris put together for you.
If you're ready to work with atax advisor on your tax planning
, be sure to schedule your callby heading over to
wwwtaxplanningcallcom.
That's wwwtaxplanningcallcom.
And be sure to subscribe to ourpodcast to be notified when the

(12:18):
next strategy is released.