Personal service corporation (PSC) tax rules

Personal service corporations are subject to special rules in the tax law. Some of these rules are beneficial; others are not. Here are some of the particulars. PCSs:

- Cannot use graduated corporate tax rates

- Are generally required to use the same tax year as that of their owners

- Can use the cash method of accounting

- Are subject to the passive loss limitation rules

- Can have their income and deductions reallocated by the IRS between the corporation and the shareholders if it more correctly reflects the economics of the situation

- Have a smaller exemption from the accumulated earnings penalty than other C corporations