Walter & Shuffain, P.C.

IRS Tries to Treat Optometrists as Personal Service Corporation

The Internal Revenue Service has undertaken a program whereby they are asserting that optometrists operating their business through a C (as opposed to S) corporation are taxable as a "personal service corporation". The implication of this position is that all income earned by the corporation is taxable at the highest marginal rate of 35% without the benefit of the lower graduated tax rates.

There is authority, which the IRS has had difficulty locating, espousing the position that optometrists are not personal service corporations. Field Service Advisory 002095 should be cited in any instance where the corporation's tax status is being questioned.

When one of our clients was recently notified by the IRS that their tax status was being challenged, our research uncovered this document that has not yet been issued in final form. We brought this to the attention of the Service group working on this initiative. We were told that they were unable to locate anything addressing the issue, and were appreciative of our sharing our discovery with them. Presumably this means they will ease up on their assault. If, however, you have already been identified, or are identified in the future, as being a personal service corporation, there is strong ammunition with which to defend your tax position.

Walter & Shuffain, P.C.

Certified Public Accountants & Business Advisors

IRS Tries to Treat Optometrists as Personal Service Corporation