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I am a resident of California and am a consultant and a

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psychotherapist. The majority of...
I am a resident of California and am a consultant and a psychotherapist. The majority of my income is from consulting. Should I incorporate? My CPA has told me that service corporations may not benefit from the new tax law, yet I see nothing that leads me to that. I will definitely be at the 35% tax rate if taxed personally.
Submitted: 3 months ago.Category: Tax
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1/9/2018
Tax Professional: Carter McBride, Certified Public Accountant (CPA) replied 3 months ago
Carter McBride
Carter McBride, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 1,039
Experience: Adjunct Professor
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Hey! I'm Carter, I'm a CPA and can help you with this.

If you incorporate into a C Corporation, you will be a Personal Service Corporation, which pays tax at a flat rate of 35%, so that would not help you.

If you incorporate as a S Corporation, then you need to pay yourself reasonable compensation and the income will flow through you to on your personal tax return. The new law allows for a 20% deduction of income. However, since you are in a specified service trade or business, you do not get the deduction if your taxable income is over $207,500 if single or $415,000 if married. Even if it is not, it is not, the deduction is generally reduced.

If you currently file as a Schedule C business, you may be able to shield yourself some from some self-employment taxes, but it probably would not be worth the cost of additional filings.

Hope that helps. If you need anything else, let me know. If not, please leave a rating. Thanks!

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