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Let’s be reasonable – Setting salaries for S corporation owners
June / July 2008
Newsletter: Focus
Price: $225.00, Subscriber Price: $157.50
Word count: 834
Abstract: If your business is an S corporation, the way you characterize payments to owners who work in the business can have a significant tax impact. For instance, failure to pay reasonable salaries to these shareholder-employees raises a red flag for the IRS. And if the agency reclassifies distributions of corporate profits as wages, you may be hit with a hefty bill for back payroll taxes, penalties and interest. This article offers tips on how to ensure salaries are reasonable. A sidebar illustrates how costly not doing so can be.