Doctors and surgeons are among the highest-paying professionals. And the passage of the Tax Cuts and Jobs Act into law late December has opened up a virtual tax bonanza for self-employed, high net worth clients.
First of all, professionals like attorneys, accountants, and doctors used to be treated as a Professional Service Corporation (PSC) that, if elected to be taxed as a C Corporation, had to pay a flat 35 percent in taxes. This would force extremely intensive entity structuring to be done. Today, under the new tax law, the PSC rule has been eliminated, and C Corporations are taxed at a flat 21 percent.
The downside to operating as a C Corporation has always been double taxation. However, in this article, I am going to show you where double taxation will never come into play, and you can put tons of money into your self-employed, high net worth client’s pocket tax free.
What you do for yourself with retirement plans you also have to do for your employees with certain exclusions, which I will outline.
For 2017 an employer can pay himself compensation of up to $270,000 and put up to $215,000 into the defined benefit plan (DBP). (A DBP works like a pension plan that your parents or grandparents may have had. The actual benefit allowed is based on factors such as age and the benefit that will be paid in the future).
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About Craig W. Smalley, EA
Craig W. Smalley, MST, EA, has been in practice since 1994. He has been admitted to practice before the IRS as an enrolled agent and has a master's in taxation. He is well-versed in US tax law and US Tax Court cases. He specializes in taxation, entity structuring and restructuring, corporations, partnerships, and individual taxation, as well as representation before the IRS regarding negotiations, audits, and appeals. In his many years of practice, he has been exposed to a variety of businesses and has an excellent knowledge of most industries. He is the CEO and co-founder of CWSEAPA PLLC and Tax Crisis Center LLC; both business have locations in Florida, Delaware, and Nevada. Craig is the current Google small business accounting advisor for the Google Small Business Community. He is a contributor to AccountingWEB and Accounting Today, and has had 12 books published on various topics in taxation. His articles have also been featured in the Chicago Tribune, New York Times, Yahoo Finance, Nasdaq, and several other newspapers, periodicals, and magazines. He has been interviewed and been a featured guest on many radio shows and podcasts. Finally, he is the co-host of Tax Avoidance is Legal, which is a nationally broadcast weekly Internet radio show.