Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

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Corporate Complications

Posted by taxguru on June 11, 2006

 

From a CPA in California:

Hi Kerry

One if my clients sent me the article you wrote about The negatives of Sub-S corporations.  With what you say you have some valid points i.e. the used of Multiple Section 179 deductions.  Which would be valid if you have a machine shop or other company with a lot of new equipment purchases. 

What you did not mention is the high cost of Social security taxes  (15%) of the earned income also the Double taxation of retained earnings distribution and the deferred taxes for the retirement contributions.

While I can see why you did not go into detail on them you should least give them mention as being considered in the overall picture of the clients tax situation. 

If I can be of any help please call or e-mail.

My Reply:

Having to address each of those issues, plus dozens more, is the very reason I insist that nobody make decisions on what entity structure to use without consulting with a qualified tax pro.

Thanks for writing.

Kerry Kerstetter

 

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