Mastering the Rules of S Corporation Shareholder-Employee Compensation

The Reasonable Compensation Standards and the Effects of the Tax Cuts and Jobs Act

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


Conducted on Wednesday, January 31, 2018

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide tax advisers and other professionals with a comprehensive examination of the rules governing compensation of S corporation officers and shareholders, focusing on how to determine, document and support reasonable compensation to avoid or withstand IRS scrutiny.

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 two levels of income tax or employment tax on the amounts.

However, the IRC requires S corporations to pay “reasonable compensation” amounts to shareholders who provide services to the business. The Code does not set a bright-line rule, but instead uses a facts and circumstances test to determine how much is reasonable compensation.

The IRS is aggressively pursuing S corp shareholder-employee compensation arrangements in circumstances where the Service deems the shareholders to be 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 has challenged compensation schemes, distribution payments have been reclassified as salary, resulting in the S corps and the shareholder-employees paying additional employment taxes plus interest and penalties.

Listen as our experienced panel provides guidance on how to document an S corporation shareholder-employee compensation plan, how to remedy plans that could be subject to examination, and how to defend against IRS challenges.

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Outline

  1. Requirement and standards for reasonable compensation
  2. Incentive compensation
  3. Equity compensation
  4. Case study
  5. Recent cases and anticipated changes arising from 2017 tax overhaul legislation
  6. Potential penalties on tax return preparers

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
  • Treatment of equity compensation to service- provider employees
  • How will the changes in the Tax Cuts and Jobs Act impact compensation of S corporation shareholders?

Faculty

Kirkland, Stephen
Stephen D. Kirkland, CPA, CMC, CFC, CFF

Atlantic Executive Consulting

Mr. Kirkland has focus on determining reasonable compensation for business owners for 20 years. He prepares analyses to...  |  Read More

Hamann, Paul
Paul S. Hamann
President
RCReports

Mr. Hamann is an expert on determining reasonable compensation for closely-held business owners. He has educated more...  |  Read More

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