Tax Advisor- Charles Woodson

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Charles Woodson- Disabled Taxpayers Tax Credits And Benefits

Taxpayers with disabilities may qualify for a number of tax credits and other tax benefits. Parents of children with disabilities may also qualify. Listed below are several tax credits and other benefits that are available if you or someone else listed on your federal tax return is disabled.

Increased Standard Deduction – Tax reform substantially increased the standard deduction for 2018 to $12,000 for single filers, $18,000 for those filing as head of household and $24,000 for married filing joint returns. Tax reform also retained the standard deduction add-on for taxpayers who are legally blind. Thus, if a taxpayer is filing jointly with a blind spouse, they are able to add an additional $1,300 to their standard deduction; if both spouses are blind, the add-on doubles to $2,600. For other filing statuses, the additional amount is $1,600. While being age 65 or older isn’t a disability, it should be noted that the “elderly” add-on of $1,300 or $1,600, depending on filing status, has also been retained. These add-ons apply only to the taxpayer and spouse, and not to any dependents.

Written by Chuck Woodson | Posted in Charles Woodson • Disabled Taxpayer Tax Credits

Charles Woodson - Reasonable Compensation And S Corporations

Unlike a C corporation, which itself pays the tax on its taxable income, an S corporation does not directly pay taxes on its income; instead, its income, losses, deductions, and credits are distributed across its shareholders’ individual tax returns on a pro rata basis. These distributions are not subject to self-employment (Social Security and Medicare) taxes. As a result, many S corporations ignore the requirement that each shareholder-employee must take reasonable compensation in the form of W-2 wages in exchange for services performed for the corporation. These wages are subject to Social Security and Medicare taxes (which the corporation and the employee generally split equally); the corporation is also responsible for paying the Federal Unemployment Tax (as well as any state unemployment taxes).

The Internal Revenue Code establishes that an officer of an S corporation is an employee of that corporation for Federal Unemployment Tax purposes. S corporations should not attempt to avoid paying this tax by treating their officers’ compensation as distributions rather than as wages.

Written by Chuck Woodson | Posted in Compensation And S Corporations