Personal Service Corporation
MAKMadison
definition of a Personal Service Corporation. The generic definition
includes doctors, lawyers, consultants, etc.
I am a computer system administrator. I contract with companies to
perform work their staff cannot handle. I have created a C corporation
as my business structure.
I would like to know: if my corporation's income is generated from
being a contract employee, does this mean my corporation is a Personal
Service Corporation?
TIA,
MK
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Before you buy.
Paul A. Thomas
> definition of a Personal Service Corporation. The generic definition
> includes doctors, lawyers, consultants, etc.
>
> I am a computer system administrator. I contract with companies to
> perform work their staff cannot handle. I have created a C corporation
> as my business structure.
>
> I would like to know: if my corporation's income is generated from
> being a contract employee, does this mean my corporation is a Personal
> Service Corporation?
The Code says:
The term "qualified personal service corporation" means any corporation--
substantially all of the activities of which involve the performance of
services in the fields of health, law, engineering, architecture,
accounting, actuarial science, performing arts, or consulting, and
substantially all of the stock of which (by value) is held directly by
employees performing services for such corporation in connection with the
activities involving a field referred to (above)......which sounds like a
computer consulting business like yours would fit the PSC mold.
There are ways out of being a PSC, if your state law allows it (and they
probably do) consider making you wife majority shareholder, or any other
relative.
Other than that, look at the "S" corporation to see if it would work for
you. PSC rules don't apply to those corporations.
--
Paul A. Thomas, CPA
Athens, Georgia
tax...@negia.net
LoTax
MAKMadison <makma...@yahoo.com> wrote:
> I searched the IRS web site, and Dejanews, but have not found a good
> definition of a Personal Service Corporation. The generic definition
> includes doctors, lawyers, consultants, etc.
>
> I am a computer system administrator. I contract with companies to
> perform work their staff cannot handle. I have created a C
corporation
> as my business structure.
>
> I would like to know: if my corporation's income is generated from
> being a contract employee, does this mean my corporation is a Personal
> Service Corporation?
>
You *don't* want to know the definition of a Personal Service
Corporation. You only want to know that your corporation is *not*
one. Trust me.
If the services you deliver through the corporation as a "computer
system administrator" are not "consulting services," your corporation
will not be a PSC. For this purpose, providing "consulting services"
is defined as "the provision of advice and counsel." See Reg Sec 1.448-
1T(e)(4)(iv). Where I come from, providing services as a "computer
system administrator" is not going to be "the provision of advice and
counsel," as long as you are doing "hands-on" system work. By this I
mean you're working with your client's system, not giving "advice and
counsel" on how, for example, to set one up. And this means the
corporation will not be a Personal Service Corporation because it's not
giving "consulting services" under this definition.
Don't get distracted by different working arrangements and the names
that may be attached to them. A person who "works as a consultant" may
or may not be providing "consulting services" as they are defined here
for purposes of the PSC test. I think that's where you were headed
with the term "contract employee" in your question. The nature of the
relationship of the worker to his customer is not part of the PSC
test. The nature of the services provided is the criterion.
Just for the record, in addition to not providing "consulting services"
you also must not be providing services in health, law, engineering,
architecture, accounting, actuarial science, or performing arts. I am
working under the impression that this is the case...a correct
assumption, I hope.
Also, if you're really concerned about the possibility that doing some
type of work other than those listed above might possibly invoke the
dreaded PSC rules, see Reg Sec 1.441-4T(e)(2) which stipulates that
activities other than those "personal services" listed above do not
constitute "personal services."
And don't get hung up on what is a *Qualified* Personal Service
Corporation. That sounds the same, but it is not, it is not, it is
not. As long as you're not doing the activities above, "QPSC" can't
hurt you, and until you're grossing more than $5,000,000 per year it
can't help you.
--
"Tax simplification, Army intelligence, Jumbo shrimp. Oxymorons all!"
LoTax
lo...@my-deja.com