Congress is currently considering a bill that would extend tax cuts first enacted during the George W. Bush administration. One aspect of this bill that has attracted little public attention would affect Social Security. Currently "S" corporations do not pay the F.I.C.A. tax, the one that funds the Social Security trust funds. "S" corporations pay no federal income tax; their income passes through to their owners who pay individual income tax. The owners do not pay F.I.C.A. taxes on the income they receive from an "S" corporation. The "S" corporation technique is used primarily by professionals such as physicians, dentists, lawyers, architects, etc. The bill would change that for "S" corporations with three or fewer key service providers. There is a fight against the "S" corporation provisions of the bill, which is being labeled as a tax increase. If passed, the bill would increase tax revenues by about $11 billion over ten years.
Tax increase or loophole closing? What do you think?
Tax increase or loophole closing? What do you think?
6 comments:
The Democrats just don’t seem to get it that small businesses create jobs and the less they make, the less people they can hire or the tax is just going to be passed on to customers as a higher fees.
This only affects the upper class. I'm not going to cry for them. And take your Reaganomics elsewhere...
Why does this matter for Social Security? If you don't pay FICA taxes, you don't collect either, right?
"Why does this matter for Social Security? If you don't pay FICA taxes, you don't collect either,"
They take your money now and up the road means test benefits to save Social Security, so you get less or nothing.
"They take your money now and up the road means test benefits to save Social Security, so you get less or nothing."
But they haven't been taking S-corp money in the first place. So down the road they weren't getting anything to begin with. By having them pay the tax, wouldn't that mean they would actually become insured, and get more? At least, unless they were already insured at the maximum level or are using the S-corp as a second income stream?
I have an S corporation and I created it as a loophole to avoid FICA taxes on small profits from my business since I am also a CSRS employee who will never receive SS. Of course the S corp is a tax loophole, but I see no justification for closing it only for S corps with less that 3 principles. Why not the bigger S corps who take advantage of the same loophole? I'd close all loopholes, but this bill preserves some, and closes some selectively. There is no justification for the current loopholes for hedge fund managers either, but they have a lot of clout in Congress that small businesses don't have so they are getting to keep much of their loophole.
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