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How To Report Officer’s Compensation For A Late S Election
Question: If I am making a late S election for a client, how do I handle the fact that the officer received no officer’s compensation throughout the year? One of the biggest areas of audit for an S corporation return Form 1120S is officer’s compensation. The IRS collects and examines data from all returns filed and develops a computerized standard of insufficient compensation. Since this area can result in deficiencies for payroll taxes (Social Security and Medicare) for every dollar of distribution reclassified to wage, tax advisors would be wise to avoid risk factors that might raise the risk of audit on officer’s compensation. By avoiding what resembles unreasonably low compensation, we can help business owners by limiting the number of Forms 1120S without officer’s compensation. However, when making a late S election, what is the rule when officer’s truly have taken no compensation? You might be surprised to learn it isn’t filing a Form 1099. Read on to find out how to reduce the risk of audit, while accurately reporting your first Form 1120S.
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CURRENT EDITION
Leaving the United States, Part III: Dual Citizenship
In Part I of this three-part series, we discussed the implications and taxes for American expatriates. In Part II we turned our attention to renouncing citizenship. Here in Part III, we will consider the halfway point of dual citizenship. And as you would expect, taxes are a serious consideration.
Reflecting On Rothing
I have been dissatisfied with most of the articles that I have read about what I call Rothing, i.e. foregoing a deduction for retirement savings with the prospect of tax-free distributions in the future or taking the tax hit on a deferred account to convert it to a tax-free account. The articles generally have a pro-Roth bias. Suze Orman, for example, swears by Roths. They also tend to not have numbers in them. What I am going to do here is to reflect on the idea of Rothing and discuss what I see as some key numbers. I’m not going to dive deep into technical issues.
Considering a Historic Building for Your Business? These Tax Credits are Good News
Historic buildings make a beautiful location for doing business. Unfortunately, many of them may seem out of the price range of small business owners. But, that’s not necessarily the case. The state and federal governments have an interest in preserving these properties, and they are willing to give you tax credits for buying and restoring a historic building. The credits reimburse a large proportion of your restoration costs. This really is a great incentive to go for a building that will give your company a unique and professional feel.
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Think Outside the Tax Box provides tax reduction strategies along with practical
implementation advice in order to reduce your clients’ federal tax bill with ease.
