S-Corporation Reasonable Compensation

You talked to your accountant or attorney about changing from a sole proprietor ( Sch-C ) or a Partnership to a S-corporation because you heard you could save on Fica and Medicare Tax. Hopefully the professionals you talked to told you taking a Salary from the Scorporation is necessary so IRS won’t be knocking

You talked to your accountant or attorney about changing from a sole proprietor ( Sch-C ) or a Partnership to a S-corporation because you heard you could save on Fica and Medicare Tax. Hopefully the professionals you talked to told you taking a Salary from the Scorporation is necessary so IRS won’t be knocking on your door. IRS is currently very active in small business examinations on this issue. When IRS comes asking for payroll for your S-Corp and you have not put yourself on payroll there can be penalties for not filing and failure to deposit plus interest on the amount that my be do on the payroll taxes.

You need to address the services you are performing for your company and make sure your compensation is reasonable. Also have you adequately documented loans so that IRS would not recharacterize the loans as capitol contributions and determine the repayments to be wages?
With IRS focusing more it resources in the next 3 years on examinations of S corporations, take a look at your company and see if you are paying yourself a reasonable compensation.

IRS is currently very active in small business examinations on this issue. When IRS comes asking for payroll for your S-Corp and you have not put yourself on payroll there can be penalties for not filing and failure to deposit plus interest on the amount that my be do on the payroll taxes. You need to address the services you are performing for your company and make sure your compensation is reasonable. Also have you adequately documented loans so that IRS would not recharacterize the loans as capitol contributions and determine the repayments to be wages?

With IRS focusing more it resources in the next 3 years on examinations of S corporations, take a look at your company and see if you are paying yourself a reasonable compensation.