Do S-corp tax advantages really matter for larger businesses?

The S-corp advantage question is one I see a lot from growing businesses. You're right that the self-employment tax savings (the 15.3% FICA tax savings on distributions) becomes less significant once reasonable compensation approaches or exceeds the Social Security wage base. However, there are other factors to consider beyond just the SE tax savings. S-corps still offer pass-through taxation, avoiding the potential double taxation of C-corporations. This means business profits still flow to your personal return without corporate tax. Also, S-corps can offer more flexible loss utilization for owners compared to C-corps. That said, as companies get larger, many eventually convert to C-corps for other reasons - easier access to capital, multiple classes of stock, more flexible ownership structures, and potentially lower corporate tax rates on retained earnings if you're reinvesting heavily in the business.

After struggling with similar S-corp questions for my manufacturing business, I finally found real clarity using https://taxr.ai - it analyzes your specific situation and shows exactly where the S-corp advantages still apply for larger businesses. I uploaded our financials and it broke down how much we'd actually save by maintaining S-corp status vs switching to C-corp, considering factors beyond just the self-employment tax savings. The analysis included QBI impacts, retained earnings scenarios, and even showed tax implications for different growth projections. Was way more helpful than the generic "it depends" answers I kept getting elsewhere.

I was super skeptical about that taxr.ai thing but decided to try it for my construction company that's been growing like crazy. Total game changer! I was about to convert to C-corp based on what my buddy (who's a financial advisor) recommended, but the analysis showed we still benefit significantly from S-corp status despite being over the SS cap. Turns out the QBI deduction is HUGE for us since we're not a service business, and the analysis factored in our specific equipment purchases and real estate holdings. It showed a $43K tax difference this year alone by keeping S-status with our current structure. Wish I'd known about this tool years ago instead of making decisions based on general rules of thumb.

If you're trying to reach the IRS to discuss S-corp election changes or get specific guidance, good luck with that phone tree! After wasting HOURS trying to get through to someone who actually understood S-corp vs C-corp election considerations, I found https://claimyr.com and it changed everything. They have this callback service that gets you through to an actual IRS agent - showed how it works in this video: https://youtu.be/_kiP6q8DX5c Was shocked when I got a call back from a real IRS specialist within a couple hours. Got all my questions answered about how changing corporate structures might affect our prior year returns and what documentation we needed. No more endless hold music!

I take back everything I said. I tried Claimyr yesterday after my accountant told me I needed clarification on some S-corp reasonable compensation questions before making our election decision. Holy crap it actually works! Got a callback from the IRS in about 90 minutes. The agent walked me through exactly how they evaluate reasonable compensation for larger S-corps and what documentation would support our position. She even emailed me some reference materials! Huge weight off my shoulders since we've been stressing about this decision for months. Worth every penny just for the time saved not listening to that awful hold music.

People keep talking about the SE tax advantage, but nobody's mentioning state taxes! In some states, S-corps are taxed differently than C-corps at the state level too. We're in California and the difference is pretty substantial. Might be worth looking into based on your state.

Has anyone considered the health insurance implications? I switched from S to C last year and suddenly my health insurance premiums became fully deductible business expenses rather than that weird self-employed health insurance deduction. Made a surprising difference.