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No, that is not how it works. Your salary is an expense for the company, paid before any corporate tax is paid, and thus reduces corporate tax. A company that
by logjammer 13y ago
No, that is not how it works. Your salary is an expense for the company, paid before any corporate tax is paid, and thus reduces corporate tax.
A company that has $10MM in revenue, and $10MM in salary expense will pay zero corporate income tax.
- gamblor956 13y agoA company paying its owner $10mm in salary cannot deduct all $10 million. It could probably get away with paying a six-figure salary (fully deductible), but the rest would be re-characterized as a dividend and the underlying "salary" expense would not be deductible. At the numbers we're talking about in this hypothetical, the corporation would be treated as severely underreporting its tax liability--meaning the highest penalty rates, back interest, and possibly including jail time.
- res0nat0r 13y agoHis point is: salaries are an expense.
- logjammer 13y agoMy point was that salaries are an expense taken before companies pay income tax, which was contrary to what the parent post guessed. Reasonable salary guidelines are a completely different matter, and I never meant to suggest that a $10MM revenue company would have a single employee who made $10MM. That example is just some pedantic nonsense you made up so you could feel smart, while you were actually just a moron who misses the forest for the trees.