Rule of Thumb Used to Calculate Reasonable Compensation Shot Down in Court
- January 1, 2021
- Posted by: Paul Hamann
- Category: Blog
By Paul S. Hamann & Jack Salewski, CPA, CGMA
Accountants are facts and figures folk. Accountants rely on data and analysis, not myths and tales.
Well, not always. In 2020 we asked 4,671 Tax Advisors if the IRS recognized Rules of Thumb such as a 50/50 split between distributions and reasonable compensation. Thirty-three percent said yes.
The IRS “Rule of Thumb” is a myth. But it’s a fact that we found 1,555 professional accountants who relied on this myth. (more…)