Mastering the Rules of S Corporation Shareholder-Employee Compensation

Reporting Health Insurance Payments, ACA Requirements, and Meeting the Reasonable Compensation Standard

Recording of a 110-minute CPE webinar with Q&A


Conducted on Wednesday, February 1, 2017

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide tax advisers and professionals with a comprehensive and practical examination of the rules governing compensation of S corporation officers and shareholders, focusing on how to document and support reasonable compensation, and on how to handle company-provided health insurance as a compensation issue.

Description

Perhaps the most significant advantage of the S corporation is the ability of shareholders to pass through some of the corporation’s net income to its shareholders without incurring employment tax on the amounts. The IRC requires that S corporations pay “reasonable compensation” to shareholders with active participation in the business. However, the Code does not set a bright-line rule, but instead uses a facts and circumstances test to determine what is reasonable compensation.

The IRS is aggressively pursuing S corporation shareholder-employee compensation arrangements in circumstances where the Service deems the shareholder is avoiding employment tax through unreasonably low compensation. The Service’s track record in tax court has been, by and large, successful. Generally, when the IRS challenges a compensation scheme, distribution payments are reclassified as salary, resulting in S corp shareholder-employees paying employment tax plus penalties.

Another challenge to maintaining S corporation officer compensation plans as compliant is the treatment of health insurance payments and reimbursements. The ACA’s prohibition against reimbursements creates another wrinkle in that analysis. Failure to properly structure and report health insurance payments on behalf of shareholder-employees could void the deduction to the business, resulting in additional tax to the shareholder.

Listen as our experienced panel provides comprehensive guidance on how to document an S corporation shareholder-employee compensation plan within IRS guidelines, how to remedy plans that could be subject to examination, how to defend against IRS challenge, and how to handle health insurance coverage for S corporation shareholder-employees.

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Outline

  1. Requirement and standards for reasonable compensation
  2. Incentive compensation
  3. Medical insurance for shareholders
  4. Equity compensation
  5. Case study

Benefits

The panel will review these and other important issues:

  • What types of businesses and compensation arrangements are most likely to attract IRS challenge?
  • Standards for structuring and defending compensation plans that are reasonable
  • Health insurance payments as compensation and meeting ACA coverage mandates

Faculty

Brotman, Samuel
Samuel D. Brotman

Atty
Brotman Law

Mr. Brotman's practice primarily centers on all aspects of tax litigation and tax controversies, and he frequently...  |  Read More

Watson, Jason
Jason Watson, EA, MBA

Managing Partner
Watson CPA Group

Mr. Watson advises small business owners in creating a map for the future. His focus is on S corporations,...  |  Read More

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