Category Archives: S Corporations

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“Reasonable Compensation”: A Matter of Perspective Between S Corporation Shareholders and the Internal Revenue Service

Most business owners think they are undercompensated. The Internal Revenue Service does too for many business S Corporation owner employees. Their perspective is not exactly the same. The focal point is a sometimes hotly contested issue called “reasonable compensation”. The IRS has come out the big winner. Here’s the story. Since the publication of IRS Revenue Ruling … Continue Reading

So now, exactly what is “reasonable compensation?”

That’s a question many business owners ask as part of the tax planning process. That is, business owners who are also employees of their corporations. And the answer as to what “reasonable compensation”  – as determined by the IRS on audit – is based on the facts and circumstance based on IRS guidelines. And what’s “reasonable” … Continue Reading

W-2 Compensation for S Corporation Owners: Retirement Plan “Tax Traps for the Unwary”

One of the most commonly used expressions in articles about taxes is this one: “tax trap for the unwary”. While I would like to be more creative than that, that expression effectively sums up a common situation we’ve seen involving the compensation of shareholder-employees of S corporations. The objective of an S corporation is, of … Continue Reading