Accumulated Earnings Tax – C Corporations

Accumulated Earnings Tax – C Corporations

The C-Corporation, as an entity, is subject to corporate level tax on its net income or profits.  Once taxed at the corporate level, the remaining “after tax” profits can be distributed as dividends, paid as bonuses, or retained by the company.  Excess profits re-invested back into the company are referred to as retained earnings.  Generally, a reasonable amount of retained earnings, or retained earnings specifically ear marked for future company expansion or major equipment purposes are not scrutinized by the IRS.  If the IRS deems accumulated earning to be excessive as compared to the reasonable needs of the company, the IRS can take the position the dollars represent unpaid dividends.  The accumulated earnings tax of 39.6% (individual rate) will apply in addition to the regular corporate tax. Remember unlike a salary or bonus, a dividend is not deductible by the company.  But be cautious, before you get the idea of clearing the retained earnings account by paying large salaries or bonuses to the owner(s) read the excessive compensation article elsewhere in our Blog.

What’s the answer – better and proactive tax planning!

Finally learn how to keep more of the money your business earns!  Call us for help or with questions!

The Business Wealth Preservation Group is a professional services firm dedicated to providing superior individualized and custom service to individuals and their businesses in the areas of asset protection, tax planning, exit strategies, and wealth building. Simply put – we want to educate you on all relevant opportunities to put more dollars into your pocket, your business and your future.

We focus on leading edge, sophisticated, and safe business strategies that will help business owners structure, operate and maintain their business to take advantage of business and tax laws rather than being encumbered by them. We partner with the business, the accountant, and the attorney to ensure the business owners are capturing all available benefits that align with their business and personal goals.

www.BusinessWealthPreservation.com
Call Us Toll Free: (888) 938-2975 (888-WE-TAX PLAN)
Email: tfoster@wetaxplan.com


Copyright 2010 The Business Wealth Preservation Group, LLC.