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Proposed Bill and SE Tax on S Corps


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Hello, is your business set up as an S. Corp? Even and LLC that is taxes as an S. Corp will have this same situation. According to my understanding of the proposed Bills in the House and Senate if your business is taxes as an S. Corp ALL your income will be subject to self employment taxes if this bill passes. The only way to get around this is to become Incorporated. As a C. Corporation you have more paper work to fill out and keep but you also have more deductions available to you.

A C. Corporations can deduct life insurance expenses for their officers for example.  If either of these bills pass your max. tax rate will be 20% or so depending on which bill. With a C. Corp you have to take a pay check which is subject to self-employment tax. But that is just a small portion of your income compared to all your income.

If you do not understand what I am talking about maybe this will help. When you get a pay check from a job the employer deducts Social Security and Medicare taxes. They then match this and send the total to the government. So if you made $100 then $6.20 will go to Social Security and your employer will need to also send $6.20 to Social Security in your name. The same for Medicare which would be $1.45 each. Plus you pay Federal taxes and State taxes out of your income.


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