S-Corporation Dodge Major Tax Increase in Unemployment Compensation Bill

As you've undoubtedly heard or read, Congressentities! The change had to do with distributions.
recently passed the Unemployment CompensationYou can currently take money out of these
Extension Act of 2010. It extends unemploymententities in the form of a salary and as a
benefits to millions of Americans still without jobs.distribution. You must pay Medicare and Social
The final version did not contain a provision thatSecurities taxes on the salary, but not on the
would have slammed S-corporations with taxes,distribution.
but we can expect the issue to be revisited.This may seem a small technicality, but it is crucial.
The Unemployment Compensation Extension ActThe tax savings are huge because most
of 2010 started out as one heck of a bill. At oneS-corporations are small businesses owned and
point, it was up to over 400 pages. Of this, littlerun by one person. While General Motors may get
had to do with unemployment compensation.bailed out in this economy, nobody is helping the
Instead, the bill was essentially a second, smallersmall S-corporations that can't get any credit and
stimulus bill packed with tax credits, deductionsare barely holding on in the Great Recession.
and new taxes ostensibly to pay for them. ThisNailing them with a massive tax increase would be
was the bill that had the provision in it to nailakin to hammering the final nail in the coffin for
hedge fund managers to the proverbial tax cross.many of them. That is the last thing we need
The provision also contained section 413. It was athese days to say the least.
small section, but a real monster. It dealt with theSo, are S-corporations safe now? Not a chance.
taxation of S-corporations and was going toYou can expect the issue to be revisited as
change the long established way these entitiesCongress thrashes around trying to find money
were taxed in a bill not even related to corporateto pay for its programs.