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RCReports determines Reasonable Compensation
for Closely-held business owners
for Closely-held business owners
Used by CPA's, EA's, Tax Advisors, Valuators, Forensic Accountants and Attorneys when they need to determine a Reasonable Compensation figure for a client.
Whether for Tax Compliance, Normalization or Planning, RCReports has a report to fit your need.
Whether for Tax Compliance, Normalization or Planning, RCReports has a report to fit your need.
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The Cost Of Doing Nothing
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Undervaluing Owner WagesThe Eighth Circuit affirmed the district court’s decision in Watson, holding that an S corporation shareholder-employee (Watson) who paid himself $24,000 in salary during 2002 and 2003 while withdrawing over $375,000 in distributions was not reasonably compensated for his services.$23,431in payroll taxes, penalties, and interest$175,470dividends reclassified by order of court
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Too Little, Too LateDahl, an accountant and sole shareholder, paid himself a small salary. The IRS hired a valuation expert to determine what other accountants were paid for similar services. What really sent this case over the edge is that Dahl paid himself less than his staff including clerks.$2,861refund claimed by Dahl was declined$22,385in payroll taxes, penalties, and interest
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Real Estate Agent Loses Reasonable Compensation CaseMcAlary set his compensation at $24,000 per year, though that was never paid. In 2006, the S corporation reported net income of $231,454, but paid no compensation to McAlary. Instead, McAlary took a distribution of $240,000. IRS hired a valuation expert to determine that a real estate agent should have been paid $100,755 salary out of his S Corp’s net income of $231,454.$83,200was reclassified as compensation.$23K+in payroll tax, interest, and penalties
Reasonable Compensation Solutions
All reports deliver an independent and unbiased Reasonable Compensation figure that can be relied on in IRS examinations and litigation.
Year End Checklist
A short but important to-do list for you and your clients, so you can
move Reasonable Compensation from the
move Reasonable Compensation from the
Three Court Cases
The modern era for Reasonable Compensation for S Corps
started in 2005 with a study of S Corporation Reporting Compliance.
started in 2005 with a study of S Corporation Reporting Compliance.
Profit v. Distribution
How does profitability factor into a Reasonable Compensation
calculation? The short answer is: “Very little.”
calculation? The short answer is: “Very little.”
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Timing S Corp Distributions
When is the proper time to make a distribution of earnings and
profits to an S Corporation’s shareholders?
profits to an S Corporation’s shareholders?
Don’t Be Cruel
This month we welcome our guest contributor Stephen Kirkland.
Stephen is regarded as one of the country’s premier
Stephen is regarded as one of the country’s premier
The Ego Factor
There are times when every small business owner’s ego can be an
asset, although when it comes to Reasonable Compensation
asset, although when it comes to Reasonable Compensation
"In court you need to be very careful about what you use as evidence, and I do use RCReports because the information comes from an unbiased source" - Stephen Kirkland, CPA, CMC, CFC, CFF, January 2018
"This reasonable compensation calculation has already assisted each of them. They place a lot of trust in me and expect me to come up with ways to keep them clean. This is the tool I use to do that." - Ron E. RCReports Subscriber since July 2017
"I thought I would let you know that I used your Reasonable Compensation Reports for two years under audit and was successful in reducing that client’s liability by $20,000. Your reports had a big part in helping to convince the auditor to lower her first assessment against my client." - Carl Hanton, EA
Bradenton, Florida, RCReports Subscriber since July 2015
What The Experts Say