If you’re running a personal service corporation, be aware that a recent tax court ruling can mean bad news for you.
You see, the IRS knows that if you’re operating a personal service corporation, you’re probably trying to increase your W-2 income in order to zero out corporate income — income that’s subject to the flat 35% tax rate.
That’s why the tax court recently ruled that the zeroing out strategy is no longer allowed!
You’ll get the whole story when you read my new article titled Tax Tips: Tax Court Puts Personal Service Corporations on Notice for Bonuses.
Three ways our fact-filled article can help you:
- We’ll explain the troubling Brinks case. Brinks Gilson & Lione was a large law firm operating as a personal service corporation. After an IRS audit it was determined that the law firm paid its employee-shareholders a bonus that would zero out their corporate income. This would allow them to escape the 35% corporate tax. The IRS said that this was a no-no. The result? The law firm ended up paying massive penalties. If you want to stay out of trouble, read the full article.
- You’ll learn what a one-owner personal service corporation should do. There’s a good argument for zeroing out personal service corporate income when you’re running a one-owner personal service corporation that has no major assets and just a few employees. We’ll give you all the details when you read the full article.
- We’ll tell you why you should consider forming another type of corporation. If a personal service corporation no longer makes sense for you, consider forming an S corporation. It pays zero taxes at the corporate level! You’ll get “must read” information when you read the full article.