By Kristy Phillips

The IMF has announced that by the year 2016 China’s economy will surpass America. They are not the only ones seeing trouble on the horizon. John Mauldin, a financial analyst and the author of ENDGAME: The End Of The Debt Supercycle And How It Changes Everything, says that the US must confront the fact that it has borrowed too much and must cut back.

The US’s $1.6 trillion-a-year deficit must quickly be cut to about $300 billion a year, or the US will face a debt crisis. These cuts are going to be painful and ordinary Americans will bear the brunt of the impact. These ordinary Americans will pay higher taxes and have significantly reduced Medicare and Medicaid benefits according to Mauldin, along with cuts to almost everything else in the budget.

Now is the time to prepare your estate for future austerity. I can’t tell you where to invest or how, but I can tell you that if you prepare with the proper estate planning and asset protection now, the consequences will be less severe later. (more…)

By Lee R. Phillips

The Unemployment Compensation Extension Act of 2010 was designed to follow the “pay as you go laws,” which means, the bill needed to generate taxes equal to the cost of extending unemployment payments.

What does all this have to do with S corporations?  The plan was to make the small businessman pay for the unemployment bill by increasing taxes on “distributions.”

There are two ways a small businessman can get money out of an S corporation.

1. Salary
2. Distributions (Dividends)

Of course, the salary is subject to the social security and other “social taxes.”  Distributions, on the other hand, were not subject to the social taxes, i.e., payroll taxes.

The S corporation owner must take a “reasonable” salary out of the company, but the rest of the profit can come out as distribution, which saves the payroll taxes.  That’s potentially a 15% + savings on the distributions over the wages.

The final version of the Unemployment Compensation Extension Act of 2010 passed both the House and the Senate with a provision that forces the recipient to pay self employment taxes (payroll taxes) on all distributions made from an S corporation.

The Unemployment Compensation Extension Act of 2010 was a 50,000 plus word bill when it left the Senate for the President’s desk.  Mysteriously, the bill that the President actually signed was a mere 1,298 word bill. (more…)