Legal Question in Tax Law in Massachusetts
Retained Earnings Tax
As a C-Corp with excessive retained
earnings, been told we may have to
pay 15% on all or some of this. If we do pay the tax now, and then
take a some out as a dividend later
will we be taxed again at the personal level?
2 Answers from Attorneys
Re: Retained Earnings Tax
It depends upon whether the distributions to shareholders are liquidating or non-liquidating and to what they come out of current or accumulated E&P.; )
Re: Retained Earnings Tax
I think you need to speak with your accountant or an attorney to minimize your tax problems. However, to answer your question if you pay dividends you will have to pay income tax on those dividends.
One solution would be to convert the C-Corp into an S-Corp and thus avoid the double taxation. However, without knowing more about the business there is no way to advise you on the right way to avoid the double taxation.
If you have more questions, please feel free to contact me.
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