S Corporation shareholders should be watching developments in Washington closely as the tax bills advance. The recently passed house bill would create a new 25 percent tax bracket for what is referred to as “pass-through entities” such as S Corporations. The tax would apply to that portion of business net income which is passed through to its owners and should not be confused with the salary or “reasonable compensation” working shareholders should receive. The senate bill would not result in the same benefit to shareholders of S corporations based upon personal income tax rates. While it does propose to provide the S Corporation shareholder the ability to deduct 17.4 percent of qualified domestic income from the S Corporation it does not provide the same tax relief, especially for those with higher incomes.
This is why it is important to contact the integrated professionals at Allen Barron to begin tax planning for 2018. Allen Barron provides economies of scale when compared to the traditional model of separate professionals who serve you as a business attorney, tax attorney, CPA, accounting professionals, tax preparers and financial planners. Each of these disciplines has their own limited perspective on the challenges and opportunities presented to S Corporation shareholders. Allen Barron’s integrated tax, legal, accounting and business advisory services provides a much deeper insight into your unique circumstances, and more comprehensive advice which balances the integrated perspective of each discipline.
S corporation shareholders should be carefully monitoring tax developments in Washington and seeking the advice of Allen Barron as they plan for 2018. This is especially true for those with offshore interests and foreign income. Will the ultimate unified version of the house and senate bills actually repeal the 3.8 percent Net-Income Investment Tax (NII) thereby reducing taxation on S Corporation income and on the capital gains realized upon the sale of your interest in an S-Corporation? What are the implications on self-employment tax and the Alternative Minimum Tax (AMT)? How should you structure your business and the realization of income to minimize the impact of tax and maximize retained earnings in 2018?
We invite you to contact Allen Barron or call 866-631-3470 for a free consultation. Learn more about the potential tax impact on 2018 planning and how our integrated business services can save you a substantial amount of time and money.