WHAT IS A “PROFESSIONAL SERVICE?”
What would the new definition of the term
"Professional Services" include? It includes
YOU if your S-Corp is “a trade or business in
which substantially all of the business activities
involve providing services in the fields of health,
law, lobbying, engineering, architecture,
accounting, actuarial science, performing arts,
athletics, investment advice or management,
brokerage services, or consulting.”
That last category, "consulting," is a subjective
catch-all that begs its own definition — but so far
doesn’t get one.
The Tax Code "clarifies" the term "consulting" this
way: "providing advice and counsel."
That's of little help!
Don't SALES people provide advice and counsel?
"I advise you to buy my product, and I will counsel
you on the reasons why."
Folks, this "Tax Extender" bill — complete with the
some 200+ "amendments" tacked on by various
Senators, is going to anything BUT simplify taxes!
It's gonna be messy!
ARE YOU ONE OF MORE THAN 4-MILLION S-CORPORATIONS?
If so, don’t cancel you free subscription to
"Tax Tips You Can Bank On," because major
changes are in this new tax bill, and they are
not kind to S-Corps.
If passed, the Tax Extender Bill will make
S-Corps begin paying Self-Employment
taxes if your company provides "professional
services." AND, adding insult to injury, the
Bill re-defines the term — much more broadly.
“Tax Extender”
The “Tax Extender” Bill is coming up for vote
in the Senate. Since the House version of the
Bill came to the Senate last month, nearly 200
amendments have been added by the Senate.
Can you believe it?
I'm saying to myself, "Self, this is not what they
call 'tax simplification'."
IF YOU HIRE YOUR KIDS OR GRANDKIDS, HERE’S HOW TO MAKE IT COUNT – BIG-TIME!
You can match the child's total earnings (up to a $5,000 max.)
as a contribution to a Roth IRA.
Assuming the minor is only 13 years old, this one-time
$5,000 contribution, assuming a modest 8% growth, will be
worth nearly a half-million dollars by age 70 — even if they do
nothing further but leave it there to grow!
Another benefit – The contributions (that's the amount put in),
but not the earnings (that's the interests/profit/dividends), may
be withdrawn tax-free at any time. That amount could, for
example, be pulled out for a down-payment on a home —
without adverse tax consequences.
HIRING YOUR CHILDREN THIS SUMMER? What the big print giveth, the fine print may taketh away.
You may know from Chapter 6 of "Home Business Tax
Savings, Made Easy!" that minors can earn up to $5,700
per year in "earned income" tax free.
BUT be aware of the fine print — that tax-free amount
is capped at $950 (not $5,700!) if their "UNearned income"
is more than $300.
Hey, of course that doesn't make any sense. Don’t
try to use logic to understanding it. This is tax law, not
real life!
