Income Splitting

This tactic is a great way to eliminate self employment taxes (currently 15.3%).

Scenario: You are a self-employed person (plumber, realtor, chiropractor, etc.) operating as a sole proprietor.

Situation: You declare your income (say $60,000 after business deductions) as 1099 (as opposed to a wage earner's W2), and then pay self-employment taxes of $9,180 in addition to the state and federal income taxes levied.

Solution: Set up a Company or Corporation with an "S" tax election. This allows you to become a W2 employee of your Company or Corporation and take part of your income as W2 and part of your income as a Distribution.

So what? Well, you don't pay any employment taxes on Distributions! Lets say you pay yourself in wages what you would pay someone else to do your job, and that works out to be about 50% of your total income, and you withdraw the balance (50%) as a distribution. That means that you don't pay employment taxes on $30,000 or in other words, you save $4,590 in taxes!
oops, there goes a dragonfly by the window - got to run