Plan now for a 2011 tax change if you own a C corp with a retained payout
If you own a C corporation or an S corp which was formerly a C, and you allowed the corporation to retain significant profits as retained earnings inside the corporation, you need to consider a tax change which could affect you in 2011.
Taking your payouts in 2009 and 2010, you’ll get a 15% tax rate on dividends. In 2011 the dividends will be taxed at your marginal rate, which for wealthy taxpayers is nearly 40%.
This is because the 15% rate was temporary, as part of the JGTRRA of 2003 and will end after 2010 unless new legislation is enacted.
Call me if you need details on strategies to reduce that tax bite.
Mike Dayoub is a fee-only financial planner and tax preparer in north metro Atlanta.
