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).