The most active piece of tax legislation right now bears the name American Jobs and Closing Tax Loopholes Act of 2010. Congress is working on other tax legislation as well, including tax breaks for small business and a permanent fix for the estate tax. Here’s where things stand. (more…)
Posts Tagged ‘S corporations’
Friday Wrapup
Friday, June 11th, 2010Ending S Corporation Employment Tax Abuse
Friday, May 21st, 2010The extenders legislation currently under consideration (see related post) would shut down a method of avoiding employment tax (including self-employment tax) used by many individuals who earn money from personal services. A dentist, for example, who earns $90,000 in fee income might form an S corporation to receive that income, and pay himself a salary of $2,000 per month, taking the rest of the money as a distribution (dividend). He would still pay income tax on the entire $90,000, but avoid paying Social Security and Medicare tax on the amount above his salary $24,000. These arrangements are subject to challenge by the IRS, but the tax agency doesn’t have the resources to pursue all the individuals who use this technique. (more…)
