Taxpayers can elect to use AMT or ADS depreciation for regular income tax purposes. The election will simplify record keeping, but will rarely be beneficial for tax purposes. The election may, however, be beneficial when the taxpayer has a regular income tax deduction or credit that is disallowed for alternative minimum tax purposes, or net operating losses or credits that are about to expire. An S-corporation, however, passes the results of operations through to shareholders, which adjusts the tax basis in their shares. The IRS has stepped up its assessment of the accumulated earnings tax on corporations.
Any excess is subject to the accumulated earnings tax.
To justify a reasonably anticipated business need, the corporation must establish specific, definite and feasible plans for use of the accumulation. Plans should be reflected in minute books and correspondence files. The consummation of plans in a future year is strong evidence that justifies an accumulation. If related employers designate a common paymaster, each corporation is treated as having paid each employee only the amounts it actually disbursed to that employee. The result is only one payment for FUTA and one payment for the employer's share of the FICA tax.