What Is a SEP IRA?
06/02/2026
A SEP IRA (Simplified Employee Pension Individual Retirement Account) is a variation of a traditional IRA that allows self-employed individuals and small business owners to save for retirement. It offers a much higher contribution limit than a standard IRA, and the contributions you make are typically 100% tax-deductible. It is one of the easiest, lowest-cost
What Is “Second class of stock”?
06/02/2026
A second class of stock refers to any share of stock, debt instrument, or agreement in an S corporation that gives certain owners different economic rights than others. IRS rules strictly require S corporations to have only one class of stock, meaning every share must have identical rights to business profits and liquidation proceeds. If
What Is “Saving clause”?
06/02/2026
A saving clause is a fundamental provision found in nearly all U.S. income tax treaties that preserves, or “saves,” the right of the United States to tax its own citizens and resident aliens as if the treaty did not exist. It effectively stops U.S. taxpayers from using international treaty rules to completely avoid paying U.S.
What Is an “S corporation shareholder”?
06/02/2026
An S corporation shareholder is an individual, certain type of trust, or estate that holds an ownership stake in a business that has elected to be taxed as an S corporation. Because of the S corp’s unique “pass-through” tax status, these shareholders are personally responsible for reporting and paying taxes on their exact percentage of
What Is an “S corporation election”?
06/02/2026
An S corporation election is a formal request made to the IRS by an eligible small business to change how it is taxed. By making this election, a business ensures its profits pass directly through to the owners’ personal tax returns, completely avoiding corporate-level double taxation. It also unlocks a unique tax structure that can
What Is “ S corporation distribution ”?
06/02/2026
An S corporation distribution is a payment of business profits made to the shareholders (owners) of an S corporation. Because S corporations are “pass-through” entities, these distributions are generally tax-free to the shareholder, provided the owner has enough “stock basis” and has already been taxed on the company’s profits. 1. Meaning of “ S corporation
What Is an “S corp”?
06/02/2026
An S corp (or S corporation) is a special tax status granted by the IRS that lets a business pass its corporate income, losses, deductions, and credits directly to its shareholders. By doing so, the business avoids paying federal corporate income taxes, and the owners report the business’s financial results on their personal tax returns.
What Is “ S corp salary ”?
06/02/2026
An S corp salary is the wage that an S corporation pays to an owner who also works in the business. The IRS requires these shareholder-employees to pay themselves a “reasonable salary” before taking any business profits as tax-free distributions. 1. Meaning of “ S corp salary ” When you own an S corporation and
What Is a Roth IRA?
06/02/2026
A Roth IRA is an individual, tax-advantaged retirement account that allows you to contribute money that you have already paid taxes on, meaning your savings grow completely tax-free over time. Because you pay the IRS upfront, all qualified withdrawals you make down the road during retirement are 100% tax-free. It serves as an incredibly powerful
What Is a Roth Conversion?
06/02/2026
A Roth conversion is a financial strategy where you move existing savings from a pre-tax retirement account, like a Traditional IRA or traditional 401(k), into an after-tax Roth IRA or Roth 401(k). Because you are shifting money from a bucket that has never been taxed to one that provides tax-free withdrawals, you must pay ordinary