Haytham, Here is the tax info. DC does not recognize S-Corp status for tax purposes. Further, if we do business from a DC office, ALL income is DC earned and thus corporate taxed regardless of whether the client is in another state, and regardless of the matter (military, clearance, fed employment, etc). Thus ALL income is taxed by DC at corporate rate. This is in addition to you paying MI tax on your salary and me paying VA tax on my salary. Plus the tax on the profit (what's left after expenses) will be taxed by VA, as it already is, but at the personal income tax rate, in addition to being taxed by DC. No offset. Sift through this. The bottom line is that as a VA S-Corp, we can open an office in DC if we're willing to shovel a substantial portion of what would otherwise be profit for us into DC coffers. Note the 9.975% corporate tax rate in DC. I vote strongly against that idea. I'll vet VA office spaces and narrow down our choices. Here's the way I see it for now. You've got responsibility for MI office space and I've got responsibility for VA office space. Also, we'll need to pay MI corporate or S-Corp tax for the percentage of income earned through your office (like Hamama, Goodfellas, and the PI case). We can't maintain any of that was earned in VA. I wasn't anticipating that but it looks like we've incurred MI tax liability, as well starting this year. S/f, Neal Neal A. Puckett, Esq LtCol, USMC (Ret) Puckett & Faraj, PC Washington DC | Virginia 888.970.0005 The information contained in this electronic message is confidential, and is intended for the use of the individual or entity named above. If you are not the intended recipient of this message, you are hereby notified that any use, distribution, copying of disclosure of this communication is strictly prohibited. If you received this communication in error, please notify Puckett & Faraj, P.C. at 888-970-0005 or via a return the e-mail to sender. You are required to purge this E-mail immediately without reading or making any copy or distribution. Begin forwarded message: From: "Lee, Hae Eun (Helen)" <hlee@rennercpa.com> Date: February 17, 2010 4:36:11 PM EST To: "Neal Puckett" <neal@puckettfaraj.com> Subject: information Neal, I misinformed you about DC. DC is one of the states that doesn’t recognize the S-corp status. A S-corp is treated as a normal corporation and the company has to pay taxes for its shareholders. So in your case, · 1120S will be prepared for Federal/ no taxes due with return · DC -20 will be prepared for DC income and the company will pay taxes. Shareholders do not need to file DC income tax return. All is done at the corporate level for DC. · VA K-1 for VA will be prepared with form 1120s and provided to the shareholders if there's any VA income by the S-corp. Shareholders will pay VA income taxes thru their individual tax return. So company will file return with Federal, DC and VA. Company will pay DC taxes Individual shareholders will pay federal & VA income taxes thru their personal returns. Income Tax Rate · Tax rate for DC (with form DC-20 - at corporate level) is 9.975% of taxable income. · Tax rate for VA (with form VA760 - at individual level) is 5.75% at maximum (see the attached tax table). Business Personal Property Tax rate: · DC - $3.40 per $100 of assessed value. But the first $225,000 of taxable value is excluded. So you may not paying any taxes. · Alexandria - $4.75 per $100 of the assessed value. Hope this clarifies your questions. Let me know if you have any other questions. Helen |
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va tax rate.pdf
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