September, 2013

ADA – Another Good Reason to be an S Corp

Something the “ADA” tax law added was more Medicare Tax—in certain circumstances. Right now, if you have a W-2, you’re paying 1.45% Medicare tax on your wages, and your employer is matching 1.45%. This is a total of 2.9% if you’re both the employer and the employee of your own S Corporation. That’s not new.

There’s now even more Medicare tax if your W-2 earnings are over $200,000 Single or Head of Household, and if your W-2 earnings are over $250,000 Married Filing Joint. There will be an EXTRA 0.9% tax added.

In the past, investment income, as distinguished from W-2 wage income, had NO Medicare tax ever.

Now, starting in 2013, there IS a 3.8% Medicare tax on “investment income” if your “Modified AGI” is above threshold amounts ($250,000 MFJ, $125,000 MFS and $200,000 Single or HOH).

You’ll note all the quotation marks above; that’s because these terms are defined specifically for this rule, and the definitions don’t necessarily mean what you think they do.

Investment income, for THIS purpose, includes interest, dividends, royalties, rents, passive income from a trade or business or gain from selling personal property, including your house.

Investment income for THIS purpose does NOT include income from an S Corporation that you’re actively working in (nor tax exempt interest, nor sale of business properties).

The way the law is written, it would appear the plan is to collect more tax from people with high earnings and/or lots of passive income, i.e. “the rich.” The way my clients are written, we’d like to pay one or both of these “extra” taxes.

Due Dates

September 16 – Estimates for 2013 Federal tax due (9/15 is a Sunday). California skips this installment (But New York and other states do not).

September 16 – Corporate Tax Returns on Extension due.

October 15 – Personal Tax Returns on Extension due.

Some important “tough love”:
If you are on extension and want me to complete your return, you will need to be proactive in getting materials to me and checking in. If you’d like a referral to another tax preparer, let me know—soon, before the deadline. No one can help you the last week before the deadline, including me. There is a government penalty for “blowing the extension,” but you (probably) won’t go to jail. If you’ve already filed for 2012, Thanks!

Classes – IRS Education Provider, Basic Payroll, Schedule C

Here’s a link to the seminars page on my website:

I’m an official Education Provider. You can find my name (Tax Buddha) listed at the IRS website: where you’ll see I’m qualified to provide federal tax update and federal tax classes for EA’s and RTRP’s. (I just knew I should have used the name AAAAA Tax Buddha!)

Basic Payroll
In conjunction with the IRS and EDD, I’m going to be doing some Basic Payroll seminars coming up in the near future.

Basic Payroll Seminar runs 9 am ­ 3 pm with an hour for lunch

The next seminar will be:

San Francisco at the SBA office 455 Market Street, 6th floor (I take BART to Embarcadero or Montgomery Street)
Wednesday, September 11, 9:00 am – 3:00 pm

Register by going to and find your favorite location.

These seminars have proven to be very popular for business owners and bookkeepers, plus they’re free.

How to Prepare your Own Schedule C
Get ready for next year and filing your own Schedule C for last year. Review what the IRS wants to know from you and how to report it for your business. This is a class for business owners who need a basic understanding of their 1040 Schedule C tax forms. We’ll also talk about what to do with the numbers once you have them. We can’t guarantee you won’t get audited, but this class will make it less likely.

I will be at the US SBA office in San Francisco at 455 Market Street, 6th Floor.
Tuesday, October 8, 6:00 pm – 8:30 pm

The Eightfold Path to Pay Less Tax and Avoid an Audit

Eight basic things business owners want to know printed in a booklet in “executive summary” form. This is ten years of working with the IRS Tax Code distilled down so it doesn’t take YOU ten years.

Just another way we’re trying to simplify your life. And the purchase is tax deductible!

You can order from Here’s the link to Amazon: 

The booklet also contains sections on how returns are selected for audit, when to seek professional help, and how long to keep your tax records.

Little Box of Inc: Incorporations Made Easy published on Kindle

The book with tips about how the S Corporation works is now published to Amazon’s Kindle, updated with additional information about S Corporations, and can be found by searching for Andrew S Rogers as author, and click on “Kindle.” Here’s the blurb:

Considering incorporating as an S Corporation? This booklet will help you understand how the S Corporation works, what you need to do to become incorporated and what you need to do once you have a corporation to stay out of trouble. The structure and the requirements are reviewed, as well as helpful tips to use your corporation to reduce your tax liability and retain your status as an S Corporation. I’ve worked with S Corporations for many years, and as a tax preparer, I can choose the kind of entity I have for my business: I choose the S Corporation myself, and I’ve convinced many of my fellow tax preparers to incorporate as well. I’ve divided the information into clear, easy-to-understand topics, and cross-referenced sections when it might be helpful.

After you’ve read this material, you can view on-line videos via for free to access more advanced information about S Corporations. You may also be interested in my “Choice of Entity” class – see below.

Tax Buddha Messenger Bags

Want to be the first person in your tax bracket to sport the fabulous Tax Buddha Messenger Bag? I’ve now got a “shop” on Café Press at in case you’d like to order your own Tax Buddha logo items. The messenger bag came out particularly well, not quite “saffron,” but easy to find in an airport.

Phone and Fax Numbers

Our northern California occasional in Alameda:
1516 Oak Street, Suite 109
Alameda CA 94501
Phone numbers are:
Phone (510) 332-0401
Fax (925) 478-2726

“You too can be enlightened about tax” — Tax Buddha