There are more bills going through Congress over the next few weeks. Here are a couple that could impact you.
1. New Tax For S Corporations?
Back in 2007, there was a proposal to assess self-employment tax on S Corporation distributions. If that passed, it would take away one of the best tax planning strategies available for the solo-preneur, the ability to take part of an S Corporation in the form of salary and the other part in the form of distribution. It would also create an unprecedented move when it started making passive income subject to self-employment tax.
Well, it’s back again. But there still doesn’t seem to be a lot of support in the House for this provision. We’re watching it closely, but for now are hopeful we’ve dodged a bullet.
2. Look Out for Estate Tax Changes. (Thank Goodness!)
We’re in a strange time now for estate tax. There is no estate tax and no gift tax. But there is also no step-up in basis when you inherit. That can be a nightmare for calculating basis (and don’t you think for a minute that the IRS doesn’t know that!).
Then in 2011, we revert back to 55% estate tax at the top and an exemption of only $1 mill.
Luckily there are some bills currently up for vote that will change the circumstances to create a better transition in 2011. There had been talk of making some retroactive changes for 2010, but personally, I think were too late in the year.
Is your tax strategy up to date? Make sure you’re ready for the tax onslaught that might be coming your way. Contact Us. to schedule your FREE tax review.