S corp tax changes that may effect you

seateddime

If you run an S corp you find a big small business tax hike next year, where as now you can take a smaller salary and the rest as a capital draw, next year you will be paying your tax rate +15% more for all the income, even if you don't take the money out.

I am not a CPA but I suspect many here will be great effected by this soon to be signed law.

Coinosaurus

Sounds like your business needs to do a lot more T&E next year

Elcontador

NOT TRUE Below is text copied verbatim from the bill which passed. What it basically says is that if you're a professional service corporation comprised of three professionals or less, either you pay yourself wages equal to or exceeding the current FICA max, or net income making up the difference between the W-2 wages and this amount will be treated as wages for FICA and Medicare purposes. This is targeted at the incorporated doctor, lawyer, etc., who nets $400,000 and gives him / herself a W-2 for $10,000.


]Ensuring collection of employment taxes earned by certain service professionals. Social Security taxes are imposed on compensation and self-employment income up to the Social Security Wage Base (currently $106,800) and the Medicare tax is imposed on all self-employment and compensation income. Some service professionals have been avoiding Medicare and Social Security taxes by routing their self-employment income through an S corporation. These taxpayers then pay themselves a nominal salary and take the position that the remaining earnings are exempt from employment taxes. The bill would address this abuse in situations where (1) an S corporation is engaged in a professional service business that is principally based on the reputation and skill of 3 or fewer individuals or (2) an S corporation that is a partner in a professional service business. The bill would also clarify that individuals that are engaged in professional service businesses are unable to avoid employment taxes by routing their earnings through a limited liability corporation or a limited partnership.

Please do not start tax related threads until you have all of the facts. It only leads to needless panic and confusion.

Lakesammman

And........this is coin related in what way??

derryb

It's coin dealer related, same thing.

Lakesammman

Ah yes - doctors or lawyers would never behave that way - what was I thinking??

Since dealers don't really get along with others, it's clearly related to S-corps with 3 or fewer members.

derryb

Thought for a minute you were with the rule #6 squad.

seateddime

<< <i>NOT TRUE Below is text copied verbatim from the bill which passed. What it basically says is that if you're a professional service corporation comprised of three professionals or less, either you pay yourself wages equal to or exceeding the current FICA max, or net income making up the difference between the W-2 wages and this amount will be treated as wages for FICA and Medicare purposes. This is targeted at the incorporated doctor, lawyer, etc., who nets $400,000 and gives him / herself a W-2 for $10,000.


]Ensuring collection of employment taxes earned by certain service professionals. Social Security taxes are imposed on compensation and self-employment income up to the Social Security Wage Base (currently $106,800) and the Medicare tax is imposed on all self-employment and compensation income. Some service professionals have been avoiding Medicare and Social Security taxes by routing their self-employment income through an S corporation. These taxpayers then pay themselves a nominal salary and take the position that the remaining earnings are exempt from employment taxes. The bill would address this abuse in situations where (1) an S corporation is engaged in a professional service business that is principally based on the reputation and skill of 3 or fewer individuals or (2) an S corporation that is a partner in a professional service business. The bill would also clarify that individuals that are engaged in professional service businesses are unable to avoid employment taxes by routing their earnings through a limited liability corporation or a limited partnership.

Please do not start tax related threads until you have all of the facts. It only leads to needless panic and confusion. >>



Actually that is exactly what I said.

If you make $100,000 and pay yourself $25,000 you just got a extra $10,500 of tax, $100,000 is far from rich and taking an extra $10,500 is huge. It puts your tax rate at about 50% for a person who is well below the $250,000 you keep hearing won't be taxed.

Your point is looking at the extreme level of what some people do. Most small business owners pay themselves more than 2 1/2% of what their company earns.

oreville

coin dealers that operate as an s corp are NOT professional service corporations.

This rule does not affect coin dealers BUT does affect many of THEIR clients!

RichieURich

<< <i>coin dealers that operate as an s corp are NOT professional service corporations.

This rule does not affect coin dealers BUT does affect many of THEIR clients! >>



Oreville, why are coin dealers that operate as an s corp NOT professional service corporations? Thanks.

ModCrewman

A professional service corporation is an entity providing professional services, those services that are provided by licensed professionals in specified fields such as doctors, lawyers, accountants, and engineers where the revenue is generated from the provision of those servicves by licensed professionals. There may be a few others that qualify...but coin dealers are definitely not one of them.

Licensed coin dealers...that's a good one.

Barry

Please do not start tax related threads until you have all of the facts.

Please do not start tax related thread, period (unless they are about 1099s )

shorecoll

On the 1099 issue, Jack Welch said on CNBC this morning that businesses will even have to 1099 any gas station where they spend $600/year. What a world!