Posted on 01/24/2012 4:42:45 AM PST by SeekAndFind
Newt Gingrich avoided tens of thousands of dollars in Medicare payroll taxes in 2010 by using a technique the Internal Revenue Service has consistently and successfully attacked. Republican Presidential candidate Gingrich and his wife, Callista, treated only $444,327 of what they got from Gingrich Holdings. Inc. and Gingrich Productions as compensation to them, while reporting a whopping $2.4 million of their earnings from these corporations as profits or dividends. Medicare taxes are levied at a rate of 2.9% on an unlimited amount of compensation and self-employment income (say, from a consulting contract, speeches or a book) but not on profits from a business.
It appears that he is not paying his fair share of Medicare tax, Robert E. McKenzie, a partner in the Chicago law firm of Arnstein & Lehr LLP concluded, in an email to Forbes, after reviewing Gingrichs 2010 tax return. McKenzie, a past chairman of the Employment Tax Committee of the American Bar Association Tax Section and a member of the IRS Advisory Council, added: There are a multitude of cases where the IRS has successfully challenged the improper tax strategy of this candidate and his accountants. Service businesses are only allowed to distribute a fair return on investment from an S corp. as profits exempt from Medicare taxes. The remainder of profits must be paid as salary subject to a 2.9% Medicare tax levy.
Since Gingrich released his 2010 tax return Thursday night during the Republican debate, news coverage has focused on his hefty income tax ratehe paid tax equal to 31.5% of his adjusted gross income of $3.14 million.
(Excerpt) Read more at forbes.com ...
Exactly. When I'm listening to the talking heads, they never mention anything about double taxation. Their analysis is shallow.
The same for their analysis of tax policy. Obama wants to raise taxes, so that means more money. The republicans want to decrease taxes, so that mean less money. Stupid and shallow.
We need tax reform. I liked Perry’s 20% flat tax.
Don’t worry. I hate thread nannies. They’ve figured out their own rules as to how people should behave on Free Republic and they enforce them with all the force of the IRS.
I’ve been chided for the same thing. I seldom post an article but sometimes when I do, I have to leave and then come back later to respond to anything I feel needs a response.
KMA
We should SOOO not let the media force us into this type of discussion.
Not about Bain, not about Mitt’s 15% taxes - except that this fact should cause us to think seriously about revamping the tax laws, not to punish capital gains but to make it fair for everybody.
But we’ve got more to worry about than this.
John Edwards absolutely did it.
The implication is that Newt did something wrong, when if fact what he did is perfectly legal. Nice try, Forbes.
Newt paid the greatest percentage and yet somehow a Chicago lawyer claims Newt isn't "paying his fair share" (precise language of the Rat talking point). I'm shocked. /s
Im the Washington D.C. bureau chief for Forbes and have worked in the bureau for more than two decades. In recent years, I've spent much of my time reporting about taxes -- tax policy, tax planning, edgy tax shelters, tax evasion, wacky tax credits, and Congressional tax malpractice. (Think AMT and the lapsed estate tax.) I also write about retirement policy and planning.
I'm Known For...
Exposing the tax games of billionaires. A cover story with the provocative title, "How To Cheat On Your Taxes".
Or Newt's 15%.
I too was unaware of the thread rules.
Don’t post without giving your opinion! Especially if it is a negative story about some popular politician!!
Secret motives you know...
So Gingrich paid 31% of his income in fed taxes and that’s still not enough for the Democrat / Communists and labor unions (I repeat myself)
Salary/wages are guaranteed things. Profits are not.
Small business owners have no guarantee of salary or profits. Yet the IRS has a vague demand that a reasonable wages must be paid.
In my opinion, small business owners should be allowed to take 100% of their profit as dividends. Further, those profits should be taxed at the capital gains rates.
I know, I know. This is an s-corp so the profits were not taxed at corporate rates. But, for legitimate businesses (not shells) where the owner has invested capital it is a much healthier use of capital gains rates than profits from flipping stocks.
“When I’m listening to the talking heads, they never mention anything about double taxation. Their analysis is shallow.”
You do not understand Subchapter S corporations. The income is not double taxed. The salary and dividends flow to the personal return in which both are taxed. The difference is that payroll taxes are assessed on salary not dividends. Since the Medicare payroll tax is unlimited, the dividends escape the Medicare payroll tax. I am not complaining about Gingrich’s usage of a subchapter S corporation, just indicating that there is no double taxation.
I believe that Obamacare has effectively closed this tax treatment as it imposes a surcharge on the Medicare payroll tax levied on all income.
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