TaxCents Strategist Diane Kennedy Says Bush Tax Plan is Huge Boon to Small Biz; Levels Playing Field for Entrepreneurs.

Business Editors

PHOENIX--(BUSINESS WIRE)--Jan. 13, 2003

President Bush's Growth and Job Plan includes promising tax incentives that will dramatically benefit small business owners if passed, says tax strategist CPA Diane Kennedy, author of "Loopholes of the Rich" and co-host of the nationally broadcast radio show, "Wealth Talk America."

She says the plan will give small business the same tax benefits only large corporations previous had.

One of the biggest benefits will come if C Corporation dividends can be paid tax-free to the shareholders. This change means that small businesses - including home-based businesses - can operate like the Fortune 500s do by using C corporate status.

In the past, small business owners stayed away from C Corporations to avoid double taxation of dividends. Under current law, a C Corporation cannot take a deduction for the dividends paid. Plus the individual shareholder who receives the dividends must pay on the dividend income - thus, double taxation; first by the corporation, then income to an individual taxpayer.

"Small business owners have historically helped pull our country out of recession and poor economic times," Kennedy said. "The Bush plan would now reward these small business owners with the potential benefit of operating in different business structures. This opens the door to an incentive that will enable entrepreneurs to keep more of their money, and enable them to invest it into further growth of their businesses. A potential boom to the economy."

C Corporation can provide many tax-free benefits to their owners that other corporate classifications (such as S corporations) and other business structures do not. Additionally, Kennedy points out that C Corporations pay taxes themselves, unlike flow-through taxation entities such as partnerships and S Corporations. For example, an S Corporation business that made $100,000 would be taxable to the owner using his personal graduated tax. They would pay tax on a portion at 10 percent, then 15 percent and so forth. That business income adds to all other income he has, so that his marginal tax rate could easily be over 30 percent.

The same business operating under a C Corporation would instead pay tax on $50,000 at the personal level (perhaps a 15 percent rate) and the C Corporation would pay tax on the other $50,000 - a 15 percent rate. This means a taxpayer might save as much as $7,500 per year in taxes, plus receive additional tax free benefits from his company.

Kennedy is founder and owner of DKA, a leading tax strategy and accounting firm based in Phoenix, AZ, and co-owner of TaxCents(TM), a tax education company that encourages individuals to make tax-advantaged financial decisions. TaxCents(TM) provides do-it-yourself tools and education so all taxpayers can take advantage of the legal loopholes they are entitled to and decrease their taxes. At www.taxloopholes.com TaxCents offers books, tapes and seminars, and the latest in what's hot in tax loopholes. Kennedy can be heard each Saturday morning on "Wealth Talk America," a national radio program offering expert financial advice to entrepreneurs and small business owners. For information contact (866) TAX-CENTS.