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These types of entities are generically referred to as limited liability entities. Although a dentist could always be personally liable for his or her malpractice or negligence, practicing within an appropriate legal entity typically shields him or her from the liabilities that are caused by other dentists (or hygienists) in the practice and from other nonmalpractice claims against the practice (e.g., claims by vendors or creditors). We're here to help dentists throughout the nation get on firm financial footing, and build successful practices. As a result, unlike the traditional C corporation, there is no double taxation in most situations because there are no income taxes due on the income at the entity level. When you own your own practice setting your salary seems like a no-brainer. In several cases where Subchapter S owners paid themselves no salary, the IRS has been successful in characterizing part of the dividends paid as salary income, leaving the doctor and his or her corporation to pay additional payroll taxes. An S-corp offers business owners three basic options for paying themselves: by salary, distributions or both. Of course, part of the savings provided by the S Corp may be offset by the expense of preparing a corporate tax return (which may be more costly than the requisite tax forms for a single-member LLC) and the other costs associated with satisfying the additional formalities of an S Corp. Apart from the modest tax savings described above, most dentists favor the LLC because of its operational simplicity and flexibility. S Corp, reasonable salary for an OD for tax purposes 1.199A-3(b)(2)(ii)(H)). How much of my income must I claim as salary in order to avoid an IRS audit? What is the actual average income, and why the disconnect? According to the IRS, an attachment, garnishment, levy, execution, or other legal or equitable process against a participant's qualified retirement plan benefits is not a voluntary assignment or alienation and, therefore, violates the anti-alienation rule. Under the guise of customer service, says this author, "dentists often become the underdogs in their patient relationships." I am concerned because I have read that SEP-IRA and other IRA accounts do not receive the same protection from the claims of creditors that ERISA-qualified plans do. In determining what constitutes reasonable compensation, the IRS looks at the source of the S corporations gross receipts and at what the shareholder-employee did for the S corporation to help generate those receipts. Therefore, owners should work with their legal advisors and accountants to determine the appropriate amount of salary that will be respected by the IRS. Reasonable Salaries and S Corps: What You Need to Know PDF Salaried Primary Dental Care Services (England) - NHS Employers 3121(d)(1); Veterinary Surgical Consultants, P.C., 117 T.C. The definition of an employee for payroll taxes purposesFICA, FUTA, SUTA and income tax withholdingincludes corporate officers and shareholders, if and when any services are performed for the business. Appx. www.dentaleconomics.com is using a security service for protection against online attacks. Most dentists that work for the NHS are self-employed contractors. The right choice depends largely on how you contribute to the company and the company . Youd have to consider the same question if he became disabled, god forbid. Any other amount paid to an owner as a dividend or a distribution is not deemed to be wages and, therefore, is not subject to Social Security and Medicare taxes.