Wednesday, May 8, 2013

Estate Planning and Asset Protections - Tax Advantages of a C Corporation

Asset Protections and Income Tax Advantages of a C Corporation

As a business owner, it is important that you are informed of the different benefits of each alternative when you are filing your taxes. Do you know daily expenses are "reasonable and necessary... " deductions or which insurances are deductible Are you a sole proprietorship or a C Corporation?

If you are a sole proprietorship and are filing a Schedule C on your individual income tax return, you are paying the highest taxes known to the law. You also have no asset protection. You have an 85% probability of an IRS audit. You are, possibly, paying taxes at the following rates:

Federal 35.00%

Self-employment 15.30%

California 9.55%

If you are a sole proprietor, it will, most likely, be my recommendation that we immediately establish a California sub-chapter C corporation. Your new corporation will provide you with asset protection and substantial income tax advantages. We will be able to have a fiscal year to defer all remaining 2010 income into 2011 allowing us to substantially lower your 2010 income tax liability. Your new corporation will provide you with the following tax advantages:

1. Internal Revenue Code Section 162 allows all expenses which are customary, ordinary, reasonable and necessary to be deducted via your corporation;

2. Internal Revenue Code Section 179 allows all equipment acquired in the year to be expensed rather than capitalized if under $250,000.00 of value;

3. Internal Revenue Code Section 105 allows a sub-chapter C corporation to have a Medical Expense Reimbursement Plan which allows all medical insurance premiums and all medical bills, including drugs, prescriptions, doctors, dentists and co-pay, not covered by insurance for the taxpayer, the taxpayer's spouse and all dependents to be fully deductible via the corporate Medical Expense Reimbursement Plan;

4. Internal Revenue Code Section 105 allows a sub-chapter C corporation to establish a Wage Continuation Plan. This allows all disability insurance to be fully deductible via the sub-chapter C corporation;

5. Internal Revenue Code Section 401(k) allows taxpayers to place as much as $49,000 per year into their control as Trustee of a 401(k) Plan which is asset protected and grows on a tax-deferred basis; and

6. Internal Revenue Code Section 401(a) allows the corporation to establish a Defined Benefit Pension Plan which will allow most clients to contribute an amount equal to their salary into their name as Trustee and receive a tax deduction, asset protection and tax-deferred income.

Being informed and well educated about your business and personal taxes will help prevent you from future repercussions from audits, will help protect your assets, and can help save you money on taxes.


Article Source: http://EzineArticles.com/7600415

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