S Corporation Salaries

s-corpFor any business operating as an S corporations, it’s important to ensure that shareholders involved in running the business are paid an amount that is commensurate with their workload.

Distributing profits instead of paying compensation subject to employment taxes is an area that the IRS targets on such returns. Failing to do so can lead not only to tax deficiencies, but penalties and interest on those deficiencies as well.

The key to establishing reasonable compensation is determining what type of work you did for the S corporation as an employee-shareholder. If you are in this situation, we need to document the factors that support the salary you are being paid.

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About cozbycpa

Heather L. Cozby is a CPA on the South Shore and Cape Cod. The managing partner of Cozby & Company, LLC, Heather has the resources and experience necessary to provide quality professional services on a timely basis and at a reasonable cost. She specializes in tax planning & preparation; audit, review & compilation services; management advisory services; bookkeeping; and accounting. Her unique niche is in working with homeowners’ associations and condominium trusts, advising with rental real estate, and providing outsourced financial consulting for mid-sized companies. She is more entrepreneurial than most accountants, and offers the best of both worlds - providing the services of a larger firm while retaining the ability to connect with her clients on a personal level.
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