Advantages Of S-Corporations To Avoid FICA Tax

* Corporations incur taxes at the corporate level at marginal rates; while, distributions to shareholders are taxed at dividend rate

Dan and Patrick Zimbrick, sole shareholders of Osprey Corporation have been required to repay compensation to Osprey Corporation that was found by the IRS to be excessive. In order to determine how these repayments are to be treated for tax purposes, it is important to note that in 2006 the board of directors made up of Dan, Patrick and their uncle John, adopted a legally enforceable resolution. The resolution stipulated that any overpayment of salary disallowed as a deduction by the IRS would be repaid to the Osprey Corporation. In late 2010 during an audit by the IRS,

With the advancements in the globalization of the economy, corporations are finding more ways to avoid the extraordinary tax rates set in place of The United States Of America. With the loss of revenue from large companies dodging taxes the government must make up for the loss by either raising taxes or changing the tax code. A recent company to avoid american taxes is Johnson Controls, a company that “…would not exist as it is today but for American taxpayers, who paid $80 billion in 2008…”(The Editorial Board). This use of American resources to get through tough times, and run to another county during an economic incline is an act that calls for reform in the American tax system. However congress has not passed any legislation to fix the

It is unfathomable to me that someone could honesty believe that their wages are not income. Mr. Cheek was an adult who we can presume is fairly educated, after all he is an airline pilot. This guy did not misunderstand the law, tax laws are not obscure, they are common knowledge, this was a man attempting to avoid paying taxes. He should be serving time in a federal prison, maybe then he will have a better understanding of tax

In determining whether or not XYZ should elect to become an S-Corp, there are many advantages and disadvantages and various tax consequences that need to be weighed. The biggest advantage in electing S status is avoidance of the double taxation associated with C-Corps. This means that items of income, deduction, gain or loss are pass through to its owners and the entity itself is not subject to tax, thus there is only one level of taxation, at the shareholder level. Other advantages of becoming an S-Corp include not having to deal with the alternative minimum tax that may applies to C-Corps with greater than $7.5 million in annual gross receipts, and not having to convert to the accrual method of accounting when average gross receipts exceeds

Both coauthors explain “the myth of corporate taxes” with two statements: “When it comes down to it, no corporation or business really pays taxes,” and therefore, “the burden of it all falls on us [the taxpayers]” (32). They continue their explanation with another claim: “The economic education of Americans is so woefully inadequate that many of us actually think we pay less as individuals when the taxes are transferred to businesses and corporations” (31). To illustrate their point, the authors created a fictional corporation with simple guidelines. Although not their actual example, the following is similar: Qwerty Inc., a manufacturer of computer keyboards, has 200 employees and 100 shareholders. At the end of the year, Qwerty Inc. sold 1000 keyboards at $100 dollars each; therefore, the yearly income was $100,000. After labor, cost, taxes, and other charges, Qwerty’s profit is $2000 for the year. If the government adds a 10% corporate tax increase, Qwerty now owes an additional $200 in taxes. According to Boortz and Linder’s logic, Qwerty has several possibilities to balance the budget from the tax increase: the shareholders could see their dividends decrease, the price on the keyboards could be raised, some employees could be fired to save on cost, or employee benefits could decrease to cover the cost of the tax increase. This simple example demonstrates the current tax code’s consequences on the taxpayers (citizens and consumers) and introduces “the embedded

Should be taxed: Professor at Syracuse University College of Law and Whitman School of Management, David Cay Johnston, in his article, 9 Things the Rich Don't Want You to

The less taxes we pay, the more lives we save. The United States has the highest corporate tax rate of the 34 developed, free market nations that make up the Organization for Economic Cooperation and Development (DECD). Unlike other countries, the United States pays a marginal corporate tax rate of 35% at the federal level and 39.2% state taxes are accounted. This is causing thousands of corporations to move operations out of the United States and into other countries. Therefore, the United States should lower the taxes of big corporations.

This is just one case of bureaucratic fraud, in one section of bureaucracy. The tax system, the IRS, and the federal spending are all symptoms of a huge fatal sickness that is government greed and the grab for power. This brings back the original idea of the government does

In response to the need, the Tax Reform Act of 1986 was enabled. The reform was intended to be revenue neutral, but broaden the tax base previously held. Congress had depressed marginal rates, and concurrently got rid of tax shelters, tax preferences, and other opportunities for tax avoidance. It now seems what worked as great solution in the past is not working now, “The Tax Reform Act of 1986 has not proved a stable outcome: Congress has since narrowed the tax base and raised income tax rates. Internationalization of the economy raises the question of whether corporate income taxes can be relied upon as a stable source of revenues. Moreover, the tax system is also under continual reexamination because federal deficits of $300–$400 billion a year are now commonplace…” (Greatz, 2007, p.

The last option that Warren explained was rationalization of the relationships between two tax bases such as income and social security taxes, state and federal taxes, and federal corporate and individual income taxes. “Integration of the corporate and individual income taxes has come to mean eliminating the double burden of the corporate and individual income taxes, where it exists, and substituting a system in which investor and corporate taxes are interrelated in a manner that eliminates or reduces the foregoing distortions. The goal is to produce a uniform levy on capital income, whether earned through corporate enterprise or not” (Warren 9).

This article begins by explaining that recently many American corporations have moved their headquarters from the U.S. to forging lands in attempts to cut down on taxes. It explains that this is called inversion, and while a few corporations doing so is simply irritating, mass inversion can be detrimental to our society. Another form of inversion is in the form of “never here” which are private companies, which began as U.S. companies that go private and move out of the country only to move to another country to become public. This enables them to duck out of many U.S. taxes without being accused of deserting the U.S.

Why is corporation adoption good and bad? Many people believe that corporation adoption has a negative outlook. However, many other believe it to be positive. With these positive and negative outlooks we can see that there is good and bad to corporation adoption. I believe that corporation adoption can be more positive than having negative.

A business owner that is generating excess cash on top of what they require to survive can take advantage of a tax deferral that is not available to salaried employees. The excess income generated can be invested in passive investments within the corporation. Since the excess income has been taxed at a lower corporate rate, this leaves more funds available for investment which allows for a higher level of compounding as well. Salaried employees are not in a position to be able to defer tax on an unlimited amount of income. Even though the business owner will eventually have to pay themselves dividends, Ottawa feels this deferral advantage gives them an unfair advantage over salary-earning Canadians.

The United States is in a recession; it has been facing some of the worse economic times since the Great Depression in the 1930’s. One option to fix the economy is to change the corporate tax rate. To lower it or to raise it, that is the question economists have been speculating. America's high corporate tax rate and worldwide system of taxation discourages U.S. companies from sending their foreign-source revenue home, which makes U.S. companies defenseless to foreign acquisition from the international opponents (Camp). Corporations and United States citizens have been fighting for a tax reform, which would hopefully help the American economy; either by lowering the corporate tax, or by raising the tax.