Withdrawing Cash from Your Closely-Held C Corporation

The simplest way to withdraw cash from a C-corporation is to distribute cash as a dividend. However, a dividend distribution is taxable to the extent of the corporation's “earnings and profits,” yet it’s not deductible by the corporation.  With S-corporations, distributions are “tax free” to the extent the shareholder has basis in the stock.  Beyond that, S-corporation distributions are taxable as capital gain.  There are, however, several alternative methods available that allow one to withdraw cash from a corporation while avoiding dividend (and capital gain) treatment:

 

Form 1099-MISC

Outside Form W-2 that your employees are issued each year, one of the more frequent forms that businesses will issue is Form 1099-MISC.  Some common reasons why this form is issued are for payment of services and rent payments.  Below is an outline of the basic aspects related to Form 1099-MISC.
 
Who must file Form 1099-MISC:

Additional Business Extenders from the “Tax Increase Prevention Act of 2014”

Over the last few articles, we’ve reviewed several tax provisions that were extended with the “Tax Increase Prevention Act of 2014.”  This article will discuss a few more deductions and credits related to businesses that were retroactively extended in this bill.

"Tax Increase Prevention Act of 2014" Individual Extenders

The hot topic as we were closing in on the end of the 2014 tax year was whether or not Congress was going to pass the extenders bill.  Fortunately for all, Congress passed the "Tax Increase Prevention Act of 2014" (TIPA) on December 16.  This act retroactively extends many deductions and credits for both businesses and individuals that were scheduled to expire at the end of 2013.
 
The following is a description of the individual provisions that were extended:
 

Extenders for Business Tax Credits and Charitable Food Contributions

With the President signing into law the Tax Increase Prevention Act of 2014, several key tax credits were retroactively extended through 2014 allowing businesses to breathe a sigh of relief after little action throughout the year. Charitable donations of food inventory also received an extender, allowing businesses a tax break for contributions of a needed resource in several communities.

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