REASONABLE COMPENSATION FOR SHAREHOLDER-EMPLOYEES OF S CORPS

REASONABLE COMPENSATION FOR SHAREHOLDER-EMPLOYEES OF S CORPS

REASONABLE COMPENSATION FOR SHAREHOLDER-EMPLOYEES OF S CORPS | Jeffrey B. Travis, CPA | (847) 267–0300 | jeffbtravis.com

S Corporations have been under additional scrutiny lately by the IRS as many small businesses have not been in compliance when it comes to reasonable compensation for reporting wages on a Form W-2.

1) Reasonable compensation is the value that would ordinarily be paid for like services by like enterprises under like circumstances.
2) Distributions by an S Corporation to a corporate officer must be treated as wages to the extent the amounts are reasonable compensation for services rendered to the corporation.
3) Determining an employee’s reasonable compensation is dependent upon a number of factors and is not an exact science.
4) The key to establishing reasonable compensation is determining the services of non-shareholder employees, the capital and equipment used in performing services, and the actual services of the shareholder-owner.
5) Factors considered by the courts in determining reasonable compensation are: training and experience, duties and responsibilities, time and effort devoted to the business, dividend history, payments to non-shareholder employees, timing and manner of paying bonuses to key people, what comparable business pay for similar services, compensation agreements and the use of a formula to determine compensation.

All of the above points play a role of determining how much a shareholder-owner of an S corporation should get paid. We all understand that the goal is to save payroll taxes, but at what at price? Also, a very key point is the less wages reported, the less you can fund your retirement plans!

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REASONABLE COMPENSATION FOR SHAREHOLDER-EMPLOYEES OF S CORPS | Jeffrey B. Travis, CPA | (847) 267–0300 | jeffbtravis.com

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REASONABLE COMPENSATION FOR SHAREHOLDER-EMPLOYEES OF S CORPS | Jeffrey B. Travis, CPA | (847) 267–0300 | jeffbtravis.com

REASONABLE COMPENSATION FOR SHAREHOLDER-EMPLOYEES OF S CORPS | Jeffrey B. Travis, CPA | (847) 267–0300 | jeffbtravis.com

Lincolnshire, IL 60069 | CPA Firms | List of Certified Public Accountants

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Lincolnshire, IL 60069 | CPA Firms | List of Certified Public Accountants

Lincolnshire, IL 60069 | CPA Firms | List of Certified Public Accountants

Lincolnshire, IL 60069 | CPA Firms

Lincolnshire, IL 60069 | CPA Firms

List of Certified Public Accountants:

Travis & Warzala, Ltd.
Mowery & Schoenfeld

JEFFREY B TRAVIS

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JEFFREY B TRAVIS

Travis & Warzala, Ltd.

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Travis & Warzala, Ltd.

RESIDENT PHYSICIANS MOST COMMON TAX ISSUES | Jeffrey B. Travis, CPA | Jeffrey B. Travis, CPA | Deerfield, IL

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My @Quora post: RESIDENT PHYSICIANS MOST COMMON TAX ISSUES | Jeffrey B. Travis, CPA | Jeffrey B. Travis, CPA | Deer…

RESIDENT PHYSICIANS MOST COMMON TAX ISSUES | Jeffrey B. Travis, CPA | Jeffrey B. Travis, CPA | Deerfield, IL