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Accumulated Earnings Tax Calculator (Sections 531 to 535)

What does this come to under the current IRS rules?

Accumulated taxable income after the dividends paid deduction and the accumulated earnings credit, with the $250,000 or $150,000 minimum credit and the 20 percent tax.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Accumulated earnings tax
$70,000
20 percent of accumulated taxable income
Accumulated taxable income
$350,000
Accumulated earnings credit used
$150,000
Drawn to one scale
Accumulated earnings tax$70,000
Accumulated taxable income$350,000
Accumulated earnings credit used$150,000
Minimum credit available$50,000
All results
MeasureResult
Accumulated earnings tax$70,000
Accumulated taxable income$350,000
Accumulated earnings credit used$150,000
Minimum credit available
Floor less accumulated earnings and profits at the prior year end
$50,000
How this was worked out
Work shownrecomputed as you type
Accumulated taxable income = adjusted taxable income - dividends paid deduction - accumulated earnings credit
Credit = retained earnings for reasonable business needs, but not less than ($250,000 - prior accumulated E&P), or $150,000 for listed service corporations
Holding or investment company credit = max(0, $250,000 - prior accumulated E&P)
Tax = 20% x accumulated taxable income

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Accumulated taxable income = adjusted taxable income - dividends paid deduction - accumulated earnings credit
  • Credit = retained earnings for reasonable business needs, but not less than ($250,000 - prior accumulated E&P), or $150,000 for listed service corporations
  • Holding or investment company credit = max(0, $250,000 - prior accumulated E&P)
  • Tax = 20% x accumulated taxable income

How it works

Section 531 adds a 20 percent tax on accumulated taxable income of a corporation that accumulates earnings beyond the reasonable needs of the business to avoid shareholder tax. The base is adjusted taxable income less the dividends paid deduction and the accumulated earnings credit.

The credit is the earnings retained for reasonable needs, or the minimum amount by which $250,000 exceeds accumulated earnings and profits at the prior year end, whichever is greater. The floor is $150,000 for corporations whose main function is services in the listed fields. A holding or investment company only gets the minimum credit. Whether a corporation is subject to the tax is not tested here.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Who is subject to the tax?

A corporation described in section 532. This tool does not test that status.

What is retained for reasonable needs?

The earnings you retain for the reasonable needs of the business, entered in the field above. This tool does not judge whether the needs are reasonable.

Can dividends reduce the tax?

Yes. The dividends paid deduction reduces accumulated taxable income.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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