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Question for the Money Doctors

Question submitted on Jun 4, 2013.

Question

I recently applied for SS (age 62) and will begin receiving that this month (june). I have an S Corp (not collecting salary greater than 15K), but plan to convert that to a C Corp for the next tax year. Is that a wise move? My understanding is that dividends from a C Corp are not considered in the 15K allowable income. True?

Answer

True, investment income does not reduce you social security benefits. See details at www.ssa.gov/pubs/EN-05-10069.pdf. Because your salary in not greater than $15,120 for 2013, it seems like a non-issue anyway. However, issues to consider are: (1) are you making the most of your SS benefits by starting at 62? If not, look into reversing course. Would you pay less tax with the S Corp or with the C Corp (including double taxation)? What is involved in converting to a C Corp--both in legal and tax cost? In other words, what ompelling reason is there to convert, given that SS reduction seems a non-issue? Those are important questions implied in your situation The answers will tell if it's a wise
move. Unfortunately, these answers depend on your specific situation. So, I highly recommend discussing these questions with your tax and/or financial advisor(s). In summary, the answer is yes, but there is more to it.


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