Whether i should form S corp or continue to get paid through my current employer.?

Question

I bring 200k every year as revenue to my employer. my employer does nothing , just hold my work visa, take 20% cut to hold my visa and pay me rest. 80k on w2 and 80k in perdiem (as i m consultant) which is tax free. but now i do not have visa issues as i am a green card holder. I am confuse which would be better for me? to continue with my employer the way it is or to form my own S corp.

In S corp i will have have all 200k but i do not think i will be able to claim 80k as an expenses. i am confuse about which way i would get more in hand.

Answer 1

$80K per diem is tax free?  I think you'd better consult with a CPA or even better, with an enrolled agent, before you get in trouble with the IRS.  Sounds like you are misinformed on what is taxable or not.

Answer 2

Judy took my answer.

I don't know how you get the $80,000 in per diem is tax free.

I would also suggest that you talk with a good Enrolled Agent very soon.

Hope this Helps.

Answer 3

See a CPA or an enrolled agent pronto.

1.  Where is your tax home?  Where are these work assignments?  If you do not have a tax home that you are away from, or if any assignment (or series of assignments) puts you in the same city for either an indefinite time period or for more than a year, your tax home becomes whereever you are working. When that happens, you aren't allowed travel expenses and all reimbursements/Per Diem become 100% taxable.

2.  If you can legally claim you are traveling away, from home, $80,000 a year is more than food.  For anything more than food, you must give your employer the receipts and be on an "accountable plan"--otherwise it's 100% taxable.  You must have receipts for lodging.  The "federal per diem" amount does not apply to non-government workers.

3.  The S-corp is a pass through.  If you can't deduct the expenses on the 1040 schedule A, you can't magically make them deductable on the 1120S (or vice versa).  Either these are valid expenses or they aren't.