Starting an S Corporation and Hiring Yourself as a Contract Worker to bend tax law?

Similiar to your first question on hiring employees versus contractors no this isn't legal. And the IRS takes a dim view of using S Corps to get around taxes. This is one area that will cause your business to get flagged for an audit the first time you file.

This is how people set themselves up to be nailed to the wall by the IRS. Let me count all the bright ideas in that description. You don't understand what an S corporation is or how it works. You don't understand rules governing employee/shareholders. You don't understand estimated tax requirements. You don't understand self-employment tax. You also have no idea the main reason why many people use S corporations. So, be like all the rest who think they have bright ideas. Get yourself in trouble with the IRS and state revenue departments, pay way too much in taxes, and create a huge administrative mess you have no idea how to handle. I say go for it.

Yes this is legal, consult an attorney to make sure the paperwork is up to snuff, and properly insure your company. This is not even that evasive, you, the employee, still pay income taxes on the salary you are given.

No. As a S-Corp officer/employee, you must pay yourself a reasonable "salary" and issue yourself a W2.

"Lets assume you start a small business and set it up as an S Corporation. You then, as Chairman of your company, hire yourself as CEO/Worker and list your status as Contract Worker. Then when "The Company" pays the workers,you pay yourself as if you are a contractor. That way, The Company doesn't have to pay Employment Taxes." This doesn't "bend" the law, it flagrantly breaks it. Also, the law requires you to pay yourself a salary commensurate with other officers in the same industry; provided the cash flow is there. So don't try to pay yourself a stipend of a salary and take the rest in distributions. "doesn't have to pay taxes on your income until April15th of the following year." WRONG, you still have to pay ESTIMATES or pay the late payment penalties. AND, you still have to pay worker's compensation insurance on all sub-contractors as well as employees. Failure to do so can (and will) void your insurance.

The guys down at the IRS will quickly be cooking you over a slow fire for that one. Just pay your damned taxes and be happy you live here.

It's called "cheating on your taxes" and it's un-patriotic.

1. No it doesn't work like that. Its tax fraud and it will be caught. If you happen to slip through the system the first year or two (unlikely), then they will go back and audit you for those years once the catch you, so it only adds interest and penalties to your problem. 2. It won't work anyway because you'd be penalized for not making your quarterly payments. I'm not sure where you got the idea that independent contractors get to wait until April 15th to pay their taxes, but its simply not true. Taxes are pay-as-you-go and you can be penalized for underpayment if you owe more than 10% of your total tax liability or more than $1000 when you file your return. The penalty would cost a lot more than any return you could get on your money in the meantime.

partners are never employees of the partnership, their portion of the profits are reported on K(1)'s and that is translated to the personal 1040 on Sch C