Tax Guru – Ker$tetter Letter

Q:

Subject: C vs. S. corporation

Hi Kerry.  I am a physician anesthesiologist and have my own C- corporation (for home-based office and business-related expenses).  I am the only person in my corporation.  Had C corp for the past 2 years.  According to one CPA, that I am considering to hire, I would save on taxes by switching to S-corporation. He also says I would pay less on Social Security and Medicare taxes under S corp.

 

My current CPA disagrees by saying that I could not deduct for my out-of-pocket medical expenses (co-pays, prescription drugs,etc.)  The net result is not very different.

 

Could you please clarify my confusion.   I would greatly appreciate it.

A:

I can’t give you specific advice without knowing more intimate details of your current and planned situations.

However, from how you describe things, it sounds as if you would be a very good candidate for using both a C and an S corp.  I have seen this done very effectively by doctors for decades, where they are able to literally get the best of both the C and S worlds. 

As I said, it is a very common technique.  If neither of the tax pros with whom you are working understands how to utilize two corps, and insists that you use an all or nothing approach with just one corp, it is time to find a more creative and experienced tax pro to assist you.

Good luck.

Kerry Kerstetter