From W2 to s-corporation
Currently I am working on W2 and thinking about forming on S-corporation to get some tax advantages. Right now I am doing research about it and need some help with questions I have.
s-corp would be formed in California. It would be single person s-corp in the field of IT. I would be the president and employee.
Here are some reasons I am thinking about going from W2 to S-corp. Please correct me if I am missing something
1. Taking deduction portion of my house under Rent
2. Taking deduction related to travel
I understand that I can claim these deductions on W2, but 2% of my adjusted gross income would not be deducted (e.g if my total expenses are $5k and my adjusted gross income is $100k, I can deduct only $5k-2%of$100k = $3k)
3. Health insurance payment to myself
I cannot deduct this on W2 as it is less than 7.5% of my adjusted gross income, but can take this deduction on s-corp
4. Bigger tax advantages space (IRA on W2 vs profit sharing contribution and salary deferral on s-corp)
5. Unemployment benefits (I can claim them on W2 as well as on s-corp)
I would be the only member of this s-corp. president and employee. I would pay myself salary, pay unemployment insurance and can claim unemployment when I won’t have any work.
Here are my questions:
1. How does tax on s-corp work?
After taking above mentioned deductions, I would pay the rest to myself in salary. Which means my total deduction will be equal to total income for the first two sections of the form 1120s. Would s-corp owe any taxes in this situation as s-corp won’t make any profit?
2. What will be the other expenses in addition of following?
Self employment tax