Here's my top ten list, Do not keep property (other than a convenience bank account) in joint tenancy. Do not put money in a pension or profit-sharing plan-IRA or other qualified plan-if you are rich or likely to become rich.
Because of the complexity of today business and potential liability problems many closely held businesses operate wit two (or more) corporations. Often, a number of key employees draw separate pay checks from more than one corporation
Joe operated two corporations, which were conducted as separate businesses Joe was president of both companies an was paid a total of $215,000 ($100,000, $115,000 respectively). Also, the corporations shared 14 other employees, including five executives who earned more than $70,000 each. There were about 80 of the employees who worked for only one of the corporations. Each shared employee received two paychecks every payday.
This pay situation made each shared employee subject to the maximum Social Security tax for each corporation. This was no problem for the nonshared employees who earned less than the wages subject to Social Security ($68,400 for 1998). But the six shared employees (including Joe) exceeded the Social Security wage base on both wages. Why? ... Because each corporation is considered to be a separate employer under the Social Security laws.
What can be done to save Social Security taxes? Joe needs to make one of the two corporations a common paymaster for the shared employees. Since the shared employees would be paid by only one of the corporations, that corporation would be considered the only employer. By using a common paymaster, taxes are due only on the one-employer maximum. The rest escapes Social Security tax.
The common paymaster break is available to any group of related corporations that have at least 50 percent common ownership, or where at least half of the officers of one corporation are also officers of the other corporation, or where least 30 percent of the employees are shared employees. It's smart to use every legal technique to trim your tax burden.blog comments powered by Disqus