Bad News for C-corp Tax & Bookkeeping Firms

[dsi]

The latest on Tax & Bookkeeping firms that operate as C-corps:

"A company that employed individuals to provide tax return preparation and bookkeeping services is subject to the flat 35-percent tax rate applicable to qualified personal service corporations. Rainbow Tax Service, Inc. v. Commissioner, 128 T.C. No. 5 (3/8/07)."

[Zee]

The latest on Tax & Bookkeeping firms that operate as C-corps:

"A company that employed individuals to provide tax return preparation and bookkeeping services is subject to the flat 35-percent tax rate applicable to qualified personal service corporations. Rainbow Tax Service, Inc. v. Commissioner, 128 T.C. No. 5 (3/8/07)."

Aren't HRB & JH C-Corporations?

[JON]

Did I miss

something. I do not think that is a change.

[Joe Btfsplk]

HRB is a publicly traded company

Aren't HRB & JH C-Corporations?

All publicly traded companies are C Corporations. Too many stockholders to be an S Corp.

[oceanlovin'ea]

Sole proprietors

That wouldn't apply to sole proprietorships or s corps with one shareholder/employee, would it?

Linda F

[rosieea]

That wouldn't apply to sole proprietorships or s corps with one shareholder/employee, would it?

Linda F

PSC rules do not apply to S Corps or proprietorships.

[Jim R]

I do not think that is a change.

It is not a change but a clarification. PSC applies to employee-owned C corporation that provide accounting services. CPAs have taken the position that only they can provide accounting services. So to avoid trouble with state laws we have been saying that bookkeeping and tax preparation is not accounting.

However three years ago I started getting letters from the IRS wanting to reclassify me as a PSC. But I then took the position that I spend more than 5% of my time in non-covered services. After three years of this I decided to stop fighting and am now a "non-profit" PSC even though only 90% of my services are accounting or consulting.

[Zee]

All publicly traded companies are C Corporations. Too many stockholders to be an S Corp.

Of course (duh...what was I thinking?)