Personal Service Corporation

Jason Watson, CPA

1 year ago

By Jason Watson, CPA
Posted Wednesday, October 18, 2023

We are not going to spend too much time on this. A corporation will be deemed a personal service corporation if-

Substantially all of the corporation’s activities involve the personal of services such as health, law, engineering, accounting, consulting, among others.
At least 95% of the stock is owned by the employee(s) performing the service.

Why do you care? You shouldn’t. Personal service corporations are taxed like regular C Corps, but must use cash-based accounting and have a calendar year-end. There is also a bit more pressure on accumulated earnings since the trigger is lower. Without proper justification for the big pile of cash, the IRS might require dividends to be paid or reclassify these earnings as dividends.

Jason Watson, CPA, is a Senior Partner of WCG CPAs & Advisors, a boutique yet progressive tax, accounting
and business consultation firm located in Colorado serving small business owners and taxpayers worldwide.

Taxpayer’s Comprehensive Guide to LLCs and S Corps 2023-2024 Edition

This KB article is an excerpt from our 420+ page book (some picture pages, but no scatch and sniff) which is available in paperback from Amazon, as an eBook for Kindle and as a PDF from ClickBank. We used to publish with iTunes and Nook, but keeping up with two different formats was brutal. You can cruise through these KB articles online, click on the fancy buttons below or visit our webpage which provides more information.


$49.95	$39.95	$29.95

Wanna Talk About Your Small Business?

Please use the form below to tell us a little about yourself, and what you have going on with your small business or 1099 contractor gig. WCG CPAs & Advisors are small business CPAs, tax professionals and consultants, and we look forward to talking to you!

We typically schedule a 20-minute complimentary quick chat with one of our Partners or Senior Tax Professionals to determine if we are a good fit for each other, and how an engagement with our team looks. Tax returns only? Business advisory? Tax prep, and more importantly tax strategy and planning?

Should we need to schedule an additional consultation, our fee is $250 for 40 minutes. Fun! If we decide to press forward with a Business Advisory or Tax Patrol Services engagement, we will credit the consultation fee towards those services.

Appointments are typically held through Microsoft Teams and are scheduled on weekdays during the work day. Yes, we can easily accommodate nights and weekends, but those are reluctantly agreed to after some eye-rolling and complaining. Additionally, our schedules are more compressed during tax season (who would have thought, right?).

Shockingly we will return all appointment requests via email with 24-36 hours weather-permitting, or perhaps a phone call (if the moment strikes us). No black holes here! In a hurry, please call us at 719-387-9800 or use our chat service in the lower right corner or the button below.

Text WCG Offices

Call Our Amazing Team

Chat With A Tax Pro