Today, many S-Corp owners draw a nominal salary, and take the rest of their cash out of the company as distributions, which are not subject to Social Security, Medicare, or Unemployment taxes.  This question of “reasonable compensation” has been a more frequent audit item in recent years.

The Democrats would like to see personal service S-Corps, like real estate agents, accountants, attorneys, and the like pay self-employment taxes on all of the profits of the S-Corp as long as 75% of the revenue was generated by 3 or fewer shareholders.  This tax would be applied at the individual shareholder level to those with AGI on their personal return of $250,000 married filing joint, or $200,000 single. The same treatment would apply to partners in personal service partnerships.

The Republicans quashed this during the 2012 session, but it is expected to find more traction as overall tax reform is taken up early next year, especially given the desire to lower overall income tax rates, and the questionable health of the Social Security Trust Fund.

• Federal Changes
  • These very much depend on who comes out the winner in November, and not much is expected to be accomplished until after the election.
  • Regardless of who wins, broad tax reform has been a consistent message of both parties, though with very different ideas on how that would look.
  • The “AMT Patch” expired at the end of 2011.  This rather technical issue is one that will have a big impact on average Americans in the 2012 year if they don’t do something about it.

We’ll keep watching for any developments and bring them to you as they come about.

The act extends a prior stimulus measure which cut the amount each employee contributed to the Social Security fund by 2%.

http://harveymackay.com/column/listen-if-you-want-to-learn/

Make it a great day!

Below is a link that will take you to a site which hosts tax returns from the current president and vice president, back through Richard Nixon, as well as the returns of Franklin Roosevelt.

The 1937 return of President Roosevelt is especially interesting - it’s a letter to his IRS commissioner explaining he can’t possibly determine his tax liability, and asking the service to do it for him. Though a bit blurry, still pretty entertaining.

http://www.taxhistory.org/thp/presreturns.nsf/Returns/A5959101FDF7DEEE85256E430078B2BA/$file/F_Roosevelt_1937.pdf

The first is Sarah Hinz, our new director of lasting impressions.  She started with us in late December, and has already been a great contributor to the team. A link to her biography on the RWR website is below.

http://www.rwrcpa.com/about_rwr/team_bios_and_directory/sarah_hinz/

The Bloomberg Businessweek article, linked below, gives a great perspective on this shift in thinking, and leaves you with some great points to think about.

http://www.businessweek.com/management/thats-why-they-call-it-work-12302011.html

To that end, we have fun to do, so make it a great day.

In addition, personal and dependency exemptions on the personal return will be worth $3,800 each, and each of the standard deductions moved slightly higher as well.  Also, the maximum amount of wages subject to Social Security taxes will move up $3,300, to $110,100 per person.

Debate continues to rage on extending the payroll tax holiday currently in place.  We’ll stay tuned to the latest coming out of Washington.

http://www.businessweek.com/management/productivitys-four-sworn-enemies-12022011.html

Here are a few inspirational quotes to help spur you in your pursuit of the attitude of gratitude.

“Reflect on your present blessings- of which every man has many- not on your past misfortunes, of which all men have some.” - Charles Dickens, Writer

“I cannot tell you how to be rich. But I can tell you how to feel rich, which is far better, let me tell you firsthand, than being rich. Be grateful. It is the only totally reliable get rich quick scheme.” - Ben Stein, Actor

“Gratitude is not only the greatest of virtues, but the parent of all others.” - Cicero, Roman philosopher