S Corp
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The Benefits of Establishing Reasonable Compensation
- September 1, 2020
- Posted by: Paul Hamann
- Category: Blog
By Jack Salewski, CPA, CGMA & Paul S. Hamann
We find it perplexing how often S Corp. owners – who invest in their business with an eye on the future and carefully analyze the cost/benefit of every decision – take a short-term, simplistic approach to reasonable compensation: Just pick the lowest possible number to minimize payroll taxes.
A reasonable compensation calculation impacts far more than just this year’s payroll tax. Talking with your clients about the benefits of accurately establishing compensation can be a life saver in retirement, sale or transfer of the business, or in the event of disability. (more…)
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Anatomy of an IRS Reasonable Compensation Challenge
- June 1, 2020
- Posted by: Paul Hamann
- Category: Blog
By Jack Salewski, CPA, CGMA & Michael E. Breslin CPA, MST, JD
What does an IRS reasonable compensation challenge look like from A-Z? Following is an analysis of a recent reasonable compensation challenge for a real estate agent in the Northeast handled by tax attorney Mike Breslin:
An S Corp owner has a fantastic year. More zeros than he’s ever seen. Then comes “The Letter” from the IRS.
That’s what happened to tax attorney Mike Breslin’s client. A real estate agent had a banner year, primarily because of one huge sale, more than doubling his usual income. But, like every other year in his career, he claimed no reasonable compensation on his S Corp tax return. (more…)
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Reasonable Compensation & the Single Shareholder S Corp
- April 1, 2020
- Posted by: Paul Hamann
- Category: Blog
By Jack Salewski, CPA, CGMA & Paul S. Hamann
“If there is only one shareholder and no other employees, should all distributions be taken out as Reasonable Compensation?”
This is a common question we receive at RCReports and like with most of the questions we receive, the answer is: “Maybe.” (more…)
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