The Heat is on at the IRS - Increasing Audits of S Corporations.
Those of you who have elected S Corporation status for your business know the tax benefits. But, beware the heat is on at the IRS to ensure reasonable compensation.
Be safe, have your accountant or tax preparer prepare a reasonable compensation analysis. The few hundred dollars you spend can save you thousands in taxes, penalties and interest. They are up to 7
Click image to find an accountant
specializing in Reasonable Compensation
Penalties that can be issued if you don't file your taxes correctly. In addition interest starts when the taxes were originally due. The tax bill can be staggering.
Reasonable compensation not only deals with the total amount paid but also looks at the services performed for that pay. As a business owner you often wear many hats, is it reasonable that each duty pays the same amount? What do employees in similar companies get paid for similar services? Does guaranteeing debt of the company warrant a higher salary?
Earlier this year FORBES.COM published this article: (click image to read the article)
By carefully valuing the salary of key employees Family businesses, closely held businesses and S Corporations have reassurance to go up against the toughest scrutiny. Using Methods followed by the IRS Valuation Professionals will give you the piece of mind you need will running your business.