Discussion:S Corp Owner Salary vs. Distributions
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Revision as of 22:35, 16 November 2005
Discussion Forum Index --> Tax Questions --> S Corp Owner Salary vs. Distributions
Cpasupport (talk|edits) said: | 16 November 2005 |
| We all have to decide at what level reasonable compensation is for S Corp owners. I've used industry averages, what employees are paid, corporate right to profit, IRS standard of living tables, etc. Anything I can to justify the lowest possible S Corp owner salary. I'd love to hear other peoples ideas. Sometimes I feel like I'm too aggressive when I'm listing $15k-$30k for salary for owners making 30k-$100k before salary and distributions, but what do we go with?
What we can get away with? That's probably a little less than what I really feel in my heart is reasonable compensation because I can make some pretty good arguments. Do we file whatever the client does. I have clients that pay 0-10% of profits in salary. Yes, they are playing the lottery audit game, but the problem is they are winning 99 in 100 times. I heard an revenue agent say that they really don't audit companies under $100,000 (He did not say revenue, profit before salary or profit after salary). I've got one right now that paid $0 salary and $40,000 distribution. Obviously salary should have been paid, but all 941s company W-2s, etc. have already been filed. If I changed distributions to salary where would I even make up the numbers (IRS's job). File as client did the books? He is starting salary now in 2005 per my advice but I'm still looking at his 2004 return (yes it is after the deadline) wondering how I could file an honest return with $0 salary or how to make up any other #s (I also feel that is wrong). What if he paid $6,000 instead of $0. We know $6,000 is unreasonable, but that is the paper trail.
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