Client Alert
Should You File Your Client’s Taxes Early?
Common sense says that filing taxes as early as possible in the year gets an onerous chore off your plate and, chances are, gets your clients’ tax refund into their pockets quicker. Common sense can also be wrong if you need, as most taxpayers do, various tax-reporting forms that can arrive in early spring, if not later. There are also many other reasons you may, or may not want, to file your client’s taxes as early as possible.
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S Corporation Shareholder-Employee Reasonable Compensation
The S corporation is a powerful tool for small business owners to manage their business efficiently and reduce payroll taxes on owner’s profits. The primary benefit small business owners get, when organized as an S corporation, is the opportunity to avoid payroll taxes on distributions after paying reasonable compensation. A reasonable wage/salary is a must for shareholder-employee/s. However, the shareholder-employee soon discovers that the lower her wage is, the lower the payroll taxes. Why not pay no wage? Or only a token wage? Of course, the IRS knows those tricks and requires the company to pay “reasonable compensation” to shareholder-employees so they’ll submit proper payroll taxes. The IRS can adjust wages to reflect reasonable compensation. Family members of the shareholder must also receive reasonable compensation for services rendered. In this article we will begin by debunking urban legends surrounding S corporation reasonable compensation followed by calculating a reasonable compensation package before finishing with a strategy.
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10 Ways Certified Tax Planners Can Prepare for Increased IRS Focus on Documentation During Audits
The IRS is ramping up scrutiny of high-net-worth individuals and businesses, increasing audit rates by over 50% for those earning above $10 million. Recent IRS initiatives backed by Inflation Reduction Act funding have intensified enforcement on wealthy taxpayers, large partnerships, real estate investors, and tech businesses. IRS agents are digging deeper during audits and expecting taxpayers to produce more documentation to support every position on their returns. To help clients navigate this environment, certified tax planners must take proactive steps to bolster documentation and audit readiness. Below are ten authoritative strategies, complete with industry examples, IRS policy references, and best practices, to prepare for the increased IRS focus on documentation.
Best Practices for Surviving (and Helping Your Client Survive) an IRS Audit
Few things strike fear in our clients’ hearts more than an IRS notice, especially one that says a client’s tax return is being examined or audited. While this must be dealt with on a timely basis, it is not a reason for you, the tax professional, or the client to panic. Here, I’ll discuss a range of best practices to ensure the success of your client’s case, plus what to do when things go awry.
If You Have an IRS Audit Coming Up, Make Sure You Have the Tax Law on Your Side
When you have to go toe-to-toe with the IRS, make sure you keep the fight clean. The only way to succeed when arguing your case with an auditor is to follow the IRS’s own procedures. And, the primary way to do that is—you guessed it—keeping proper documentation. With this article, you’ll better understand where tax authority is derived, what rules the IRS must stick to, and what rules the IRS accepts.