Tuesday, January 10, 2012

WSJ article "More Firms Enjoy Tax-Free Status”

I read this today on The Wall Street Journal:
Sixty-nine percent U.S. companies were organized as pass-throughs, or nontaxable organizations, in 2008, compared with 24% in 1986, according to data from the Internal Revenue Service. Members of Congress and the business community disagree on whether the exemption should change. Increasingly, traditional for-profit companies are at a competitive disadvantage against pass-throughs.
The article title is “More Firms Enjoy Tax-Free Status.”
Here is a gripe: it is misleading nonsense to refer to passthroughs as tax-free or nontaxable. Passthroughs are partnerships, LLCs and S corporations, and generally their income is allocated to and reported by their owners and partners. For Kruse & Crawford clients, this means that the passthrough income is reported on one or more individual income tax returns. It is there that tax is calculated and paid. Client tax estimates are due, and we are presently working on several estimates due on January 16th.  I stayed here late last night working on something the Wall Street Journal says is nontaxable and apparently not “for profit.”
If passthroughs are “nontaxable” or not “for profit,” then this tax guy has missed the boat for more than two decades.

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