Taking a Look at the New Tax Law and the Fun Stuff it Offers

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Honestly, it’s not that long ago that the new tax law was codified, and I must have spent three days going through it.

If you are anything like me, you read these things with the thought in your head of “What can I get away with?” Different clients come into my head. Let’s point out all the fun we can have with the new tax law.

I realize that most accountants out there advise an LLC taxed like an S Corporation. The LLC is a better legal entity, and because of its flexibility you can have it taxed pretty much any way that you want. S Corporations were always the professionals go to for all new companies. It saved self-employment tax, and only had one level of taxation.

The new tax law has a complicated and convoluted way of calculating the tax on all pass-throughs. Generally, the first 20 percent of the money made isn’t taxable, only 80 percent is taxable. That is, UNLESS, the amount passing through is $157,000 or more, and then that reduction reduces, eventually to nothing. S Corp doesn’t look so good now.

However, on the C Corporation front, taxes have been reduced to 21 percent. Think really hard about all of the things you give up as an S Corporation owner. If you are a more than 2 percent shareholder of the S Corp, you can’t have any fringe benefits.

I know what you are thinking, and I had the same thing pounded into my head about C Corporations:  double taxation.

Stay with me. Let’s put an example of you owning an S Corporation in which the net income is $100,000.

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About Craig W. Smalley, EA

Craig Smalley

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.


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By jeremyt
Jan 9th 2018 16:56

May need to review the part about commuting benefits... http://www.chicagotribune.com/news/nationworld/politics/ct-gop-tax-bill-...

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Jan 14th 2018 03:12

Benefits under dependent care and education assistance have rules that state the benefits can’t go to owners generally in larger proportion than other employees, was my understanding. If that is no longer the case, then that is great and would make C corporations much more attractive. Proceed with caution and do your research before relying on just an article.

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