"The budget proposal contains certain tax reforms to tax breaks coveted by small businesses," says Bob Barth, Tax Director at Tax Savings Professionals, a national tax consulting firm.
Sebastian, FL (PRWEB) March 12, 2014
"The budget proposal contains certain tax reforms to tax breaks coveted by small businesses," says Bob Barth, Tax Director at Tax Savings Professionals, "coincidentally, these provisions also are almost identical to those offered by Dave Camp (R., Mich.) Chairman of the House Ways and Means Committee."
According to Barth, a veteran tax attorney, both of the plans have a provision that says S corporations [partnerships and limited liability companies] would need to conform to the self-employment tax that sole proprietors now pay," says Kyle Pomerleau, an economist at the Tax Foundation, a nonpartisan tax-policy think tank in Washington, D.C. "That's going to increase [business owners'] tax liability.
Unlike sole proprietors, limited partners of a partnership (including limited liability companies) and shareholders of an S Corporations can shield much if not all of their income from self-employment taxes.
While a general partner's earnings are subject to self-employment taxes, their "distributive share" of partnership income isn't. Similarly, an S corporation shareholder, who is an employee, is subject to regular employment taxes on his or her wages. But this person isn't subject to self-employment taxes on S corporation distributions.
Barth points out that the effect would be that partners and S corporation shareholders who "materially participate in the trade or business of the partnership or S corporation" would be required to treat 70 percent of their combined income--that is, compensation and proportionate business earnings--as net earnings from self-employment. As a result, that income would then be subject to self-employment taxes (or employment taxes in the case of S Corporations).
About Tax Saving Professionals
Tax Savings Professionals (http://www.TaxSavingsProfessionals.com) is a national tax consulting organization consisting of tax attorney’s, CPA’s, Enrolled Agents and paralegals. The company works with client’s directly as well as with other members of the financial community, such as financial planners, CPA’s, accountants and others by providing valuable tax advice and tax reduction strategies that in turn help their clients save money. Since 1998 http://www.TaxSavingsProfessionals.com have helped more than 7,000 clients nationally save more than an estimated $500 million dollars in taxes. The average American pays 31% in taxes, our clients on average pay 15% in taxes. The majority of tax professionals regularly use between 15 and 20 tax strategies, Tax Savings Professionals use more than 400 tax deductions and tax strategies that are often misunderstood or even unknown by many tax professionals.