What about Bob?

what about bob sm

In the 1991 movie What about Bob, Bob Wiley (played by Bill Murray) asks Dr. Leo Marvin (played by Richard Dreyfuss) how best to conquer his phobias.  Dreyfuss deadpans, “Baby steps.”

I often think about this movie when I am asked by CPA’s and financial advisors about the best way to get their clients to comply with IRS guidelines on Reasonable Compensation for S Corps – My answer is the same as Richard Dreyfuss – “Baby Steps”. Start by sending them an Issue Letter on the subject; we provide our users with an issue letter that you can download and customize to fit your firm’s personality.  You may be surprised how many of your clients will be happy to comply, once they understand the issue and its tax implications and consequences.

Next, prioritize your efforts toward the clients that would benefit the most.

  • Start with the 10% of your clients who are likely overpaying themselves for the services they provide their S Corps; help them save some money on their employment taxes.
  • Next, help the 10% of your clients who are grossly underpaying themselves for the services they provide their S Corps; save them from a costly and painful Reasonable Compensation challenge by the IRS and save yourself from acquiring a reputation with the IRS as an advisor to S Corp clients who severely underpay their Reasonable Compensation.
  • Last, slowly integrate the remaining 80% of your S Corp clients.  This step is essential for CPA’s and tax professionals who want to develop additional consulting services with their clients beyond merely preparing year-end taxes.  Our users frequently tell us that the conversations which start with a Reasonable Compensation Report often lead to additional consulting services with their clients.

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