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ILN Today Post

Tax Development: Proposed Rules to Unify Income Taxation of Pass-Through Entities

President Obama’s proposed budget for 2016 includes a plan to standardize the income taxation of all pass through entities. If enacted, shareholders of S corporations would be subject to tax (including self-employment tax) on the same basis as partners in a partnership.

Historically, the IRS has struggled to fairly and consistently tax passthrough income under the Federal Insurance Contribution Act (FICA) and its self-employment tax counterpart (SECA). This is because only “wages” are subject to FICA taxes and only self-employment “earnings” are subject to SECA taxes. More…

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