Dissolve S corp?

I wasn't sure where to post this so let me know if I should elsewhere or if someone of this forum would discuss with me individually.

Here's my situation. I work a full time job in a Purchasing dept of a company. In 2006, I became a paid tax preparer running my part-time business out of my home. I formed an LLC then was encouraged by a SCORE rep to file as an S corp for the tax advantages. I have about 250 clients, mostly 1040s and Schedule Cs. I know a little about S corp since I've had to do my own but I'm still not comfortable doing others. As you know S-corps require more than a sole proprietor LLC with the quarterly filings...etc. I'm not sure its worth the trouble.

1. I will probably not make over $15,000 annual profit with my business, so is it worth it for me to keep S corp status as lately I've been thinking of dissolving it and keep my single-member LLC status to simplify reporting...etc.

2. I'm confused about an S-corp paying dividends and the profit I have to report on my taxes. I paid myself reasonable wages in 2014 for my tax work. Say the business still shows a profit of $3000. Can I pay myself (only member) a part (say $1000) of the $3000 as a dividend that gets special tax treatment since I'm in the 15% tax bracket and the rest report on K1 as ordinary income for Fed and St income tax purposes or not?

Thanks for any help.

With an S-corp you pay a reasonable salary reported on a W-2, file all your payroll reports.

Whatever profit remains is taxed on your personal return (the profit/loss goes on schedule E2.
When you report it on your personal tax return you have already paid the tax on that profit, and so when you take the profit out you do not pay tax again. The distribution of the profit is not taxed (like a dividend), the amount of the distribution (generally speaking) is not taxed and does not go on your tax return. The only thing that goes on your tax return is the profit/loss from the K-1. So in your example, the 3000 profit goes on your tax return, and you are free to pay yourself the entire 3,000 as a distribution of profit and you pay no tax on that no matter what tax bracket you are in.
Sort of like how on a schedule C a person reports the profit & pays the tax on the profit, what they take out of the business is not taxed.
That is a very simplified explanation. If I had a business that only had a 3,000 profit I would not advise them to be taxed as an S-corp, I usually wait until the business has grown a bit. Maybe take a little CPE on S-Corps, even if you are not going to prepare them yourself for others, you should be more familiar with it as you will probably at some point obtain clients who have S-Corps and then you will need to know more, or send them to someone else.

Kathy, thanks for the explanation.

So, is it possible for an S-corp to pay (me for instance) a dividend as a business expense thus lowering the amount of profit I have to report on my return? If I received part of the $3000 "profit" as a dividend, say $1000, then is it possible that would be an expense then I'd be reporting $2000 as a profit or am I missing it?

Kathy, thanks for the explanation.

So, is it possible for an S-corp to pay (me for instance) a dividend as a business expense thus lowering the amount of profit I have to report on my return? If I received part of the $3000 "profit" as a dividend, say $1000, then is it possible that would be an expense then I'd be reporting $2000 as a profit or am I missing it?

First, Schenckdmm, in a S-corp, it's a distribution. You cannot use it to pay a business expense. It's income to you that you don't have to pay social security and medicare taxes on. This is why the IRS expects S-corp shareholders to pay themselves a reasonable salary. If you have out of pocket expenses, then your minutes book should have a resolution on how you handle reimbursement. Business expense reimbursement will lower profit.

No. The distribution is not an expense to the corporation. Sort of like a schedule C, if a sole proprietor pays himself 1,000 it goes to owners draw right? It does not effect the profit.
If an S-corp makes a distribution of profit it would go to "owner distributions" an equity account, it has no effect on the profit. You still pay tax on the $3,000 profit whether you take it or not.

Got it, thanks to both of you for the information. I think I'm going to start the process to dissolve my small S-corp and keep it at an LLC for simplicity. In the meantime, I am going to start taking some CPE on Corps and Partnerships.

Thanks again!