SECA Tax Hike for S-Corps
Posted on June 18, 2010
As part of Dasmah’s comittment to keep our clients and friends notified of any tax changes we urge all small business owners to read the following letter that was sent out to all of our clients this month:
“This is a notification to our clients that are either S-Corps or are an LLC filing as a small corporation. There is a bill that could be passed before the end of the year that will affect all S-Corp filers. The law would make the entire profits subject to SECA tax (Self Employment Contribution Act). Currently the tax is 15.3% on the first $106,800 in profits and 2.9% above that. The following fields will be subject to the SECA tax: accounting, law, health, actuarial science, engineering, architecture, lobbying, consulting, brokerage services, investment management, sports and the performing arts. S-Corps that are not in professional service fields, such as manufacturers, will continue to be exempt from the SECA tax.
We will advise you when we hear whether or not the law passed. We are currently advising any of our new clients to not opt for the small corporation tax filing election. We will also notify you if there are other tax law changes that could affect your company.
If you have questions, please contact us.”
We have attached a spreadsheet can help you to determine what your taxes will be. Click on the link and download the spreadsheet to your computer. We hope this helps you to determine the best possible strategy for 2011.
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Re the S Corp SECA tax – will each dollar of S corp income be subject to both the 6.2% (x2) and the 1.45% (x2) taxes? Why wouldn’t the salary and the K-1 income be added so that the balance over 106,800 would only be subject to the 1.45% (x2) taxes?