Some bad news, some good news, and then some really bad news. We have three tax updates; changes that you need to know about.
1. The State of Florida can no longer waive the $400 late fee for filing your corporate annual report. In the past, if you missed the May 1st deadline, you could simply check a box certifying that you did not receive a postcard reminder from the State of Florida and they would waive the $400 penalty. No more. They just changed this law effective May 1st, 2010.
2. The new HIRE Act applies to spouses. If your spouse has worked less than 40 hours in the past 60 days, you can hire him/her and save 6.2% in Social Security taxes. And if you keep them on the payroll for a year, you may be entitled to additional business credits as well. Up until now this would not be such a big deal for S Corporations who don’t pay self employment taxes on corporate income. That is, until…
3. The latest jobs bill will remove the exemption from self employment taxes for personal service S Corporations. Unless this provision is removed, small S Corp owners could face an additional 15.3% in self employment taxes at the end of the year. This tax will be on income, not just distributions. So if you make $100,000 and use it all to pay down loan principle, you could end up without a penny to show for it at the end of the year and about $15,000 in additional taxes due. If you have a small S Corporation that focuses on personal services, such as law firms, accounting (yours truly included), health, engineering, architecture, consulting, brokerages, etc you will probably be hit with this tax hike. Manufacturers, retailers and most construction firms should be exempt.
We will keep you posted but one things for sure – taxes are on the rise so you better pay attention!