re: Tax question for new business

This is a pretty standard plan for the avoidance of self-employment tax on significant amounts of s-corp income. The difference between the maximum salary subject to Social Security and the reasonable compensation you pay yourself from the s-corp will never be subjected to self-employment tax or Social Security withholding. If you assume a $50,000 annual difference and a 15% self-employment tax rate it results in a permanent savings of $7,500 per year.