The Tax Lawyer’s Blog

A tax lawyer and certified public accountant makes your taxes less taxing

The Tax Lawyer’s Blog header image 2

IRS to Target S Corporation Distributions, IRS Chief of Employment Tax Says

August 18th, 2008 · No Comments

John Tuzynski, IRS Chief of Employment Tax, SB/SE Speciality Programs, has announced that the IRS is expanding efforts to close the $15 billion dollar tax gap in the employment tax area.  Specifically, Tuzynski stated that S corporation shareholder wages and the issue of reasonable compensation for services rendered would be a target area.

For a good primer on the issue of reasonable compensation see the Journal of Accountancy’s, S Corporation Profits or Payday? by James A. Fellows and John F. Jewell.

Tuzynski stated that tax return preparers would be subject to preparer penalties if they prepared S corporation returns that reflected a “less-than-market’ salary for services rendered by small business owners.

For at least the last five years the IRS has been threatening to go after S corporations that understate owners’ compensation.  I have been involved in dozens of S corporation audits in the last ten years and have not had a single IRS examiner raise this issue. 

Is the IRS just crying wolf or could this be the time they actually do pursue this issue?

Tags: Announcements · S Corporations

0 responses so far ↓

  • There are no comments yet...Kick things off by filling out the form below.

Leave a Comment