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https://www.thebalancesmb.com/what-is-a-reasonable-salary-for-an-s-corporation-officer-397939#:~:text=The%20IRS%20requires%20that%20distributions%20and%20other%20payments,cash%20distributions%2C%20payments%20of%20personal%20expenses%2C%20or%20loans.
https://lnktax.com/reasonable-compensation-for-s-corporation-officers/
Under IRS rules, S corporation officers are treated as employees for tax purposes. This means that an S corporation must pay reasonable compensation to its officers in exchange for the services they provide instead of simply treating payments as distributions. The IRS closely looks at the compensation paid to S corporation officers and the distributions they receive to …
https://letsledger.com/blog/taxes/reasonable-compensation/
Publicly held companies typically earn more money from stock, pushing executive officer salaries higher. To curb excessive executive salaries, the IRS limits the allowable deduction of pay to employees. A public corporation cannot deduct more than $1 million annually in officer compensation per executive officer. This number is total compensation including …
https://www.upcounsel.com/reasonable-compensation-s-corp
The IRS scrutinizes shareholder-employees who are not "reasonably compensated." Shareholder-employees are corporate officers who contribute significantly the day-to-day business operations. The officers would rather receive compensation as an investor rather than get paid a worker's salary. Why? Because it affects their take-home revenue.
https://www.irs.gov/businesses/small-businesses-self-employed/paying-yourself
Because an officer of a corporation is generally an employee with wages subject to withholding, corporate officers may question what is considered reasonable compensation for the efforts they contribute to conducting their trade or business. Wages paid to you as an officer of a corporation should generally be commensurate with your duties.
https://wageoptimizer.com/general/an-s-corp-officers-reasonable-compensation-how-to-guide/
https://wcginc.com/business-services/s-corp-salary/
Let’s say your reasonable salary is $60,000 and you pay $12,000 in health insurance premiums. You would pay yourself a $48,000 salary but your W-2 Box 1 and Line 7 (Officer Compensation) on your S corporation tax return would show $60,000… however only $48,000 is subjected to Social Security and Medicare taxes.
https://www.irs.gov/pub/irs-news/fs-08-25.pdf
federal income tax withholding under the Internal Revenue Code. When corporate officers perform services for the corporation, and receive or are entitled to receive payments, their compensation is generally considered wages. Subchapter S corporations should treat payments for services to officers as wages and not as distributions of cash and property or loans to …
https://www.aicpa.org/resources/article/s-corporation-reasonable-compensation
Because nonwage distributions by an S corporation to a shareholder are not subject to self-employment or payroll taxes, an IRS audit of an S corporation return will typically focus on whether reasonable compensation has been paid to shareholder-employees and whether the appropriate amount of employment-related taxes has been paid. The IRS has the authority to …
https://www.firmofthefuture.com/content/what-is-reasonable-compensation-for-an-s-corporation/
According to the instructions on Form 1120S, U.S. Income Tax Return for an S Corporation, “Distributions and other payments 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.”. But, what is reasonable compensation? It’s not ...
https://www.grfcpa.com/resource/how-c-corporations-can-pass-the-reasonable-compensation-test/
July 31, 2017. When a C corporation’s shareholder-employees are given generous salaries and benefits, the corporation should be prepared to fight IRS claims that some of the compensation payments are actually disguised dividends, which were paid according to stock ownership. Specifically, the IRS will argue that the corporation can’t justify compensation …
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