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Reasonable Compensation Planning Season Part I: Profitable S & C Corps

By Paul S. Hamann & Jack Salewski, CPA, CGMA

Third quarter already – are you kidding me.  This year, like most, has zipped by.  Soon the last tax deadline will have come and gone, and “Planning Season” will start.  There are two groups of small business clients you should start checking in with as early in planning season as possible to discuss Reasonable Compensation.  They are:

Are you Still using a ‘Rule of Thumb’ to Calculate Reasonable Compensation?

By Paul S. Hamann & Jack Salewski, CPA, CGMA

If you answered yes, my next question is why?  I was at a neighborhood wine party last week and had a conversation with Justin (not really his name).  I met Justin last year at the same event – a nice young man and entrepreneur who was doing very well for himself.  I asked how his business was going this year and he told me even better than last.

The Unintended Consequences of Not Having Reasonable Compensation (Part II)

By Jack Salewski, CPA, CGMA & Paul S. Hamann

Calculating Reasonable Compensation for an S Corp; C Corp; Small or Closely-Held business owner is not just about making the IRS happy.  There are many unintended consequences of not having reasonable compensation. They can be broken down into current; long-term; valuation; entity choice; and preparer issues. In Part 1 we discussed the current and long-term issues. This month we take a look at valuation issues; entity choice; and the potential impact on the tax preparer.

The IRS Job Aid for Determining Reasonable Compensation

By Paul S. Hamann & Jack Salewski, CPA, CGMA

A few months ago an internal IRS Job Aid (Appendix) for determining Reasonable Compensation became public.  The Job Aid was developed by a team of IRS valuation professionals from the Large Business and International Division.  Can this job aid provide insight on determining Reasonable Compensation for Small Closely-Held businesses?  Yes, however sifting through the 54-page document and pulling out the relevant information can be mind-numbing.

The Job Aid describes three Approaches for determining Reasonable Compensation:

The Unintended Consequences of Not Having Reasonable Compensation

By Jack Salewski, CPA, CGMA & Paul S. Hamann

Calculating Reasonable Compensation for an S Corp; C Corp; Small or Closely-Held business owner is not just about making the IRS happy.  There are many unintended consequences of not having reasonable compensation. They can be broken down into current; long-term; valuation; entity choice; and preparer issues. We will discuss the current and long-term issues here and follow up next month with valuation issues; entity choice; and the potential impact on the tax preparer.

Three Tips to Reach Expert Status in Your Market

By Salim Omar (Guest Author)

One of the most powerful ways to grow your CPA practice is to develop a strong personal brand and establish yourself as an expert, your client’s trusted advisor.  When individuals and businesses go shopping for a CPA firm, they’re buying more than just services – they’re buying a relationship with a person and/or a team of professionals.  Your objective is to give clients and prospects a strong reason to have personal confidence in you and your team.

You’re Busy We’ll Keep it Brief

By Paul S. Hamann & Jack Salewski, CPA, CGMA

A big thank you for making RCReports The Leader in Determining Reasonable Compensation for S Corps, Small and Closely Held Business Owners.  We know you are in the depths of tax season so we’ll keep it brief.

When you come up for air after tax season, login to your RCReports dashboard and check out the upgrades and improvements:

Why there is no Safe Harbor for Reasonable Compensation Figures

By Paul S. Hamann & Jack Salewski, CPA, CGMA

Maybe instead of a ‘Safe Harbor,’ we should look for ‘Any Port in a Storm’.  The IRS and Court Guidelines for determining Reasonable Compensation for an S Corp are anything but smooth sailing.  We are often asked if there are any guarantees that the IRS will accept a Reasonable Compensation figure.  The short answer is NO.  Why?  Because calculating a Reasonable Compensation figure is not included in any of the thousands of pages of IRS Code or Regulations.  Therefore we are left to look at how the Tax Courts interpret Reasonable Compensation in S Corp cases.

Step by Step: How to Determine Reasonable Compensation for an S Corp Owner

By Paul S. Hamann & Jack Salewski, CPA, CGMA

The old adage “Simple isn’t always easy” perfectly sums up the IRS and Court guidelines for determining Reasonable Compensation for an S Corp owner.  At first blush the IRS and court guidelines seem simple enough – but once you start to follow the roadmap the IRS and Courts have laid out – something simple quickly turns to something more challenging.  Let us explore step by step best practices for determining Reasonable Compensation for a shareholder-employee of an S Corp:

Reasonable Compensation Year End Check List

By Paul S. Hamann& Jack Salewski, CPA, CGMA

I am not a big fan of checklists or New Year’s resolutions, but – there’s always a but –that being said, they are helpful in an annoying sort of way.  So, in an attempt to use a checklist and New Year’s resolution for good I have put together a short but important to-do list for you and your clients, so you can move Reasonable Compensation from the Procrastination column to the Done column.

Three Court Cases that Define the Modern Era of Reasonable Compensation

By Paul S. Hamann & Jack Salewski, CPA, CGMA

The modern era for Reasonable Compensation for S Corps started in 2005 with a study of S Corporation Reporting Compliance.  This study spawned numerous reports that changed and shaped the way IRS examiners address non-compliance on the issues of Reasonable Compensation.  This change can be seen in the differences between Pre-2005 court cases and Post-2005 court cases.

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