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Tax Law (Questions About Taxes)/Incorporating at the end of 2012



I have been operating a sole proprietorship for a few years now and had a very profitable year this in 2012 so far. I was wondering if I incorporated this year (in December 2012) would profits already made would be shielded from the self-employment tax. Say I've already made $40,000 in 2012 before December 1, and I incorporate on December 1. Is all of that $40,000 subject to the self-employment tax or is there a way to retroactively use it as profit for the corporation formed December 1st.

Thanks for your help,


There is not a legal way, that I am aware of, to make it retroactive.  If things look like they are going to continue to look good you may want to consider setting up an S Corp for the start of 2013 and getting yourself on payroll via the S Corp.  Good luck!

CPA Wilmington NC

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Adam Shay, CPA


I have an expertise in individual income tax and income tax planning. I also have experience working with small businesses (variety of entities) on both income tax and accounting needs.


I have spent 5 years managing 15 franchised tax locations. For the past 6 months I have owned my own tax preparation and accounting firm the specializes in assisting small business and more complex individuals. Accountant Wilmington NC


MBA from the University of Maryland BS from the University of Virginia

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