home page
 
home About QTS Service Partners Careers Get a quote News Contact QTS Search
 
  payroll
  unconditional excellence
  401K administration
  background screening
  benefits administration
  drug screening
  HR consulting
  HR outsourcing
  labor law posters
  product demos
  time & attendance
  unemplyment cost management
  workers compensation

  

American Payroll Association    Bureau of National Affairs

 
SSL
   

Tax Increase for S Corps in 2011

A change has been added to a bill that reinstates a set of expired tax breaks to help offset some of the measure’s tax relief. The change will eliminate the ability for small service firms to circumvent Self Employment Contributions Act (SECA) taxes on their profits. The tax is currently 15.3% of the first $106,800 in profits and 2.9% for all profits exceeding $106,800.

The tax increase is aimed at S firms where the principal value of the entity is the skills and/or reputation of the three or less workers. Generally this applies to firms that specialize in accounting, architecture, brokerage services, consulting, engineering, health, investing, law, lobbying, performing arts, and sports.

The intention of the law is to end abuse of S firm owners taking profits in the form of dividends. These dividends are taxed as income on the owners 1040, however, are not subject to SECA.

A recent court decision (Watson, D.D., Iowa) upheld the IRS' power to recharacterize dividends as wages subject to payroll tax. In this situation, the owner of a S firm performing CPA services took an annual salary of $24,000 and also received dividends of $220,000. The IRS deemed his salary unreasonably low and required that $175,000 of the dividends be reclassified as wages subject to payroll taxes.

Contact: Jim Ritter (jim.ritter@qtspayroll.com)

 

 

Top of page
Contact us
Print this Page

QTS News Releases

Tax Increase for S Corps in 2011
Release Date: 6/23/2010

Supreme Court Ruling on Tips
Release Date: 6/10/2010

HIRE Act Employee Affidavit
Release Date: 4/9/2010

HIRE Act/Jobs Bill Update
Release Date: 3/23/2010

Compliance Poster Services
Release Date: 3/2/2010

More Audits in Store for Employers of Contractors
Release Date: 2/19/2010

QTS Supports Making Strides
Release Date: 12/20/2009

Social Networking for Nonprofit Organizations
Release Date: 12/15/2009

Federal and Retirement Plan Limits and Rates
Release Date: 11/16/2009

Genetic Information Nondiscrimination ACT
Release Date: 11/5/2009

Beware of IRS "Refund" Scam!
Release Date: 4/2/2009

Extensive COBRA Legislative Changes Enacted
Release Date: 3/6/2009

Headquarters : QTS Payroll Services, Inc.
8170 West Sahara Ave., Suite 100
Las Vegas, NV  89117

Phone: 1-866-QTS-PAYS - FAX: 1-888-258-9616

QTS Payroll Services, Inc. : Idaho Office
202 North 9th Street, Suite 303 E
Boise, ID  83702

Email: info@qtspayroll.com - Web: qtspayroll.com

powered by webadmin and supported by Readywebgo